87. Memorandum From Maurice Ernst, National Intelligence Officer for
Economics at the Central Intelligence Agency, to Norman Bailey of the National Security
Council Staff1
Washington,
January 27,
1982
SUBJECT
- Romania’s Balance of Payments and Debt Problems
As per your request, attached is some material on Romania’s balance of
payments and debt problems. Romania clearly is unable to meet its
financial obligations. To do so would require cuts in imports so severe
as to force substantial declines in industrial production, such as
occurred in Poland. The Romanians have already squeezed all the consumer
goods they can out of the economy, and this has occasioned some sporadic
unrest.
The receipt of a $65 million CCC credit
would fill only a small part of the balance of payments gap. They would
probably use such a credit to free up foreign exchange with which to pay
interest on debt and perhaps repay those creditors they cannot put
off.
The prospects of such a credit being repaid would be poor. There is
little chance that the Romanian economy will substantially turn around
in the next two or three years, and next to no chance it will generate
large new sources of foreign exchange earnings. Their oil fields,
traditionally a large source of hard currency earnings, are at a late
stage of development and declines in production are probably inevitable.
Romania hopes to further diversify its hard currency exports, but has
had little success to date.
[Page 262]
Attachment
Paper Prepared in the Central Intelligence Agency2
Washington,
January 27,
1982
SUBJECT
- Romanian Difficulties in Meeting Debt-Service
Obligations
- 1.
- Romania will continue to have difficulties in meeting debt
service obligations on its estimated hard currency debt of $10
billion. Bucharest has placed its needs for 1982 at $4.5
billion, including $2 billion in principal on medium- and
long-term debts, a $.5 billion current account deficit, $.6
billion for short-term credits, $.3 for building up reserves and
extending credits, and $1.2 billion in arrearages from 1981.
Projected sources of finance fall far short of needs. Bucharest
hopes to secure approximately $2.45 billion, consisting of $.75
from the IMF and World Bank,
$1.2 billion in supplier credits, and $.5 billion from “other
sources” (probably a balance of payments loan from Arab
financial institutions). The financial gap could prove to be
even larger than the $2.05 billion presented by Bucharest.
Holding the current account deficit to just $.5 billion will be
difficult as Bucharest encountered serious domestic problems in
slashing the 1980 current account deficit of $2.4 billion by $1
billion last year. Furthermore, supplier credits may not be as
readily available until the arrearages are cleared up.
- 2.
- Rescheduling is currently under way with Western bankers, but
reaching an agreement will be difficult. Bankers so far have
offered to reschedule only $1.5 billion of the amounts due this
year with the condition that government debts be rescheduled
too. Bucharest desires to reschedule everything due this
year—including the arrearages—plus debts due through
1984.
- 3.
- Romania faces hard times even if rescheduling takes place. Its
principal hard currency exports are hindered by the soft world
market for petroleum products and by a second consecutive poor
performance in the agricultural sector.
Bucharest continues to push food exports despite the severe
shortages at home. Most nonessential imports have been cut and
import reductions are now affecting needed raw materials. Futher
cuts in imports will have negative repercussions for domestic
growth and already low living standards.
