Local Authorities in Romania Can Apply for State Treasury Loans to Co-Finance EU-Funded Projects

At the initiative of the Ministry of Development, Public Works and Administration and the Ministry of Finance, a new draft regulation has been published for public consultation, allowing local administrative units to apply for loans from the State Treasury.

The measure provides access to a total ceiling of 1.5 billion lei, which can be used to ensure co-financing for projects funded by non-reimbursable external funds from the European Union and other European donors under intergovernmental programs. The loans are also available to public institutions fully funded from local budgets and intercommunity development associations, in proportion to their respective obligations.

The draft regulation will enter into force after its adoption by the Government and publication in the Official Gazette of Romania.

The loan mechanism aims to address urgent financial needs of local public authorities. According to an analysis by the Ministry of Development, 7,659 projects funded by non-reimbursable external funds are currently under implementation, and many local authorities are struggling to secure the necessary financial resources from local budgets to cover ineligible expenses or co-financing obligations.

“Through this measure, we are supporting local authorities that have encountered difficulties in continuing their projects due to lack of financial resources in their local budgets. The ultimate goal is to improve the quality of public services for citizens,” stated Minister Cseke Attila.

The proposed mechanism allows local authorities to apply for loans to cover:

• ineligible expenditures,
• pre-financing and/or co-financing,
• and the refinancing of local public debt arising from previous loans contracted from privatization revenues recorded in the general current account of the State Treasury.

Loan terms and interest:

• The interest rate is based on the 3-month ROBOR, as published by the National Bank of Romania on the last working day of the month prior to loan approval,
• plus a fixed margin depending on the loan maturity:
• 1 percentage point for loans with maturities of up to 3 years (inclusive),
• 1.5 percentage points for loans between 3 and 5 years (inclusive),
• 2 percentage points for loans between 5 and 10 years (inclusive).

The resulting interest rate remains fixed throughout the loan term. Loans may benefit from a 12-month grace period, and repayment can be made over a period of 1 to 10 years, with the option of early repayment.

These loans will not be subject to the legal debt ceiling, and to ensure accessibility for smaller localities, specific borrowing limits are set based on administrative level:

• Counties: up to 35 million lei each
• County capitals and sectors of Bucharest: up to 30 million lei each
• Municipalities: up to 20 million lei each
• Towns and communes: no borrowing cap