The reduction of the budget deficit to 1.75% after the first five months of 2026 represents a breath of fresh air for Romania ahead of July discussions with Moody's and Fitch Ratings, according to economic consultant Adrian Negrescu.

'It is a genuine performance that has a strong chance of helping to secure Romania's sovereign credit rating at a time when political noise is creating a strong perception of instability regarding the country's situation. It is an excellent argument which, together with the relative stability of the exchange rate, represents the only positive news in a sea of problems. The fact that, according to preliminary data presented by [Finance Minister] Alexandru Nazare, public investment increased from 40.57 billion lei to 44.73 billion lei is also a positive signal for the economy,' Adrian Negrescu explained on Thursday in a post published on Facebook.

However, he argues that the reduction in the budget deficit is not enough.

'However, it is not enough, in other words, we should not get carried away. Seventy-one per cent of investments were financed with European funds and this demonstrates, if any further proof were needed, just how dependent we are on European financing, on the money coming from Brussels, which is criticised by part of the political class. The five-month budget execution data also represent only a snapshot in time. From the second half of the year, we will see whether politicians are capable of maintaining this positive trend ensured by the Ministry of Finance and whether they will take the measures necessary to meet the 6.2% deficit target,' the analyst said.

According to him, 'politicians who announce tax cuts and higher incomes for the population are selling nothing more than illusions' because the budgetary situation remains extremely serious. In essence, more than 90% of the taxes paid by individuals and businesses are spent on social expenditure such as pensions and salaries, while the remaining 10% is used to pay interest on loans.

'Under these circumstances, the state is condemned to borrow heavily, the equivalent of 1 billion euro per week, in order to have enough money from one month to the next to pay all its bills. That is why I believe that whoever comes to power at Victoria Palace [Government House] will face an extremely difficult and very clear mission: increasing state revenues in order to reduce the financial pressure we are currently under,' Negrescu added.

He says that only by reducing tax evasion and broadening the tax base 'will we be able to emerge from this alarming situation which, as the European Commission has also estimated, could lead us in the coming years into a financial situation typical of a bankrupt country.'

Negrescu pointed out that 'if we continue borrowing relentlessly without reducing expenditure and lowering the state's bills, public debt will reach 80-90% of GDP and we will no longer be able to repay it.' There are already difficulties, the analyst says, in paying the more than 10 billion euro in interest alone on loans contracted so far.

'In other words, regardless of the election-driven promises made by politicians, if we do not move away from the paradigm of living on borrowed money, life will become more difficult for all of us in the future - higher taxes, lower investment and fewer jobs. We need predictability, economically sound measures and professionals,' the economic consultant concluded. AGERPRES (RO - writing by: Cristian Anghelache; EN - writing by: Adina Panaitescu)