The Ministry of Finance issued a new three-year debt on the domestic capital market in the amount of BGN 200 million with an annual interest rate of 3%. This is happening for the first time in a year and a half.
The Ministry of Finance reports the issue as successful due to the long absence of the domestic market, the high liquidity of the financial system and the selected parameters and time for issuance.
The collected funds will be used to refinance liabilities due this year, finance the budget deficit and secure the fiscal reserve.
“If we look at the Budget Law, voted by a large majority in the parliament, we have a deficit of nearly BGN 6 billion. If we look at old debt issues, we have a maturing issue on the domestic market of BGN 380 million, an issue of “Global Bonds” for BGN 3 billion Adding these 2 numbers together, the state needs nearly 10 billion,” calculates Lachezar Bogdanov, chief economist at the Institute for Market Economics.
“In order to fill the holes opened by Mr. Vassilev while he was finance minister, the entire budget was calculated to meet artificial criteria and the hope of these young guys was that if we enter the eurozone from January 1, it will be unblocked the foreign exchange reserve, to spend another year or two”, believes Viktor Papazov, a financier.
Increased tax collection, raising tax rates and tightening budget spending would limit the need for new government debt, analysts say. In an election campaign, politicians may favor more spending from the state budget in order to please voters, leading to more debt issuance.
“There will inevitably be new debt if the budget is in deficit. One cannot continuously monitor issue by issue, who issued when, without starting the big conversation about how much deficit it is reasonable to accept as normal,” says Lachezar Bogdanov, chief economist at IPI.
“It will certainly be necessary to take out new loans and debts, because the holes must be filled. At the end of last year, when we commented that the budget proposed by Mr. Vasilev was unrealistic, they convinced us that it was not. That’s how it started to it can be seen that it is,” adds Viktor Papazov, a financier.
Citizens can buy government bonds under the current rules, the finance ministry says, but the program for facilitated trading by individuals is not yet ready.
Source: BNT
