Balance of payments financing in Romania. The role of remittances

The main goal of this paper is to illustrate and analyze the sources of financing the balance of payment deficits in Romania. Within this context, it is provided – for the first time, at the best of our knowledge – an assessment on the rising role and significance of foreign remittances in the Romanian economy; an attempt is also made to understand what lies behind the high level of errors and omissions.

The first section of the paper looks at the balance of payment dynamics in Romania over the last decade. Additional focus is placed on the balance of payment evolution in section two, which is devoted in part to the remarkable adjustment that occurred in 1999.

Section two also tests the hypothesis of potential correlation between the budget and the current account deficits. Section three tackles the sensitive issue of financing the balance of payment deficits, emphasizing two items: foreign remittances, respectively errors and omissions.

The paper ends with a section on comprising conclusions.