Reserves Under Pressure
The depreciation of the national currency is the most visible symptom of broader financial stress, but it is accompanied by a substantial drain on the central bank’s foreign exchange reserves. Data from the BNR indicates that foreign exchange reserves stood at 64.83 billion euros on April 30, 2026, a decrease of more than 2 billion euros from the 67 billion euros recorded on March 31. Overall international reserves, including gold, fell from 80.278 billion euros in late March to 78.007 billion euros by the end of April.
The central bank’s balance sheet shows that while there were inflows of 1.8 billion euros in April—attributed to changes in minimum reserves held by credit institutions and funding for the Ministry of Finance—outflows totaled 3.996 billion euros. These outflows were driven by payments of principal and interest on foreign-currency-denominated public debt and transfers from the European Commission’s account. The BNR has likely intervened in the foreign exchange market to curb volatility, yet the fact that the exchange rate breached the previously defended threshold of 5.1 lei per euro suggests that the pressure for depreciation is strong enough that intervention has become costly relative to its benefits.
Capital Flight and Rising Borrowing Costs
Before the exchange rate shock fully materialized, the initial impact of the political instability was felt in Romania’s financial markets. Both local and international investors reacted to the perceived instability by selling local assets, including government bonds and shares on the Bucharest Stock Exchange (BVB). Many investors moved funds abroad, while domestic holders shifted their portfolios toward euros and euro-denominated assets.
This sentiment shift has significantly raised the cost of government borrowing. Interest rates across Romania’s sovereign debt yield curve have increased by approximately 50 basis points (0.5%) since the crisis began. Compared to late February, when rates had hit a two-year low, the increase stands at roughly 100 basis points (1%).
The internal financing of the budget deficit has also been severely disrupted. In March, a month marked by high volatility, the Ministry of Finance raised only 1.8 billion lei from the local market, well below the normal monthly average of over 10 billion lei. Since the political crisis escalated in mid-April, the Treasury has borrowed just 2.62 billion lei, falling short of its regular program. With approximately 1.417 billion euros in public debt maturing in May 2026, the government faces immediate liquidity challenges.
Fiscal Risks and Structural Concerns
The combination of a political crisis, large budget deficits, and current account imbalances has raised concerns that Romania could risk entering a classic emerging-market crisis scenario. Analysts note that the BNR had pegged the exchange rate in recent years to support fiscal adjustment, a process that was delayed until the budget deficit reached a crisis level of 9.3% of GDP in 2024, coinciding with a severe economic recession.
The immediate economic consequences of the leu’s depreciation are already being felt by the population and the private sector. The weaker currency leads directly to higher prices for imports and services quoted in euros, including loans, rents, and utility bills. The situation is further complicated by external factors, including the war in Iran and the associated energy crisis, which have disrupted internal financing mechanisms and increased the need for funds to roll over maturing debt.
As the Bolojan Government continues to implement unpopular measures to satisfy the Fiscal Council and the BNR, the market’s confidence remains fragile. The next critical period will be the May debt maturities, where the government must demonstrate its ability to finance obligations without triggering further capital flight or a deeper depreciation of the leu.
