Bulgaria managed to issue 2.25 billion euros of external debt, albeit at a high cost

Bulgaria managed to issue 2.25 billion euros of external debt, albeit at a high cost
Bulgaria managed to issue 2.25 billion euros of external debt, albeit at a high cost

However, this is a relatively small consolation for the missed chances to obtain financing earlier in the year, under much more favorable conditions – then, according to market estimates, a yield could have been achieved more than 2 percentage points below that achieved on Thursday. Already in the spring, after the adoption of the initial budget for 2022, the need for an external debt issue was clear, but it never came. Then-finance minister Asen Vassilev attributed the delay to frozen markets surrounding the outbreak of war in Ukraine, although in the same period other countries of Bulgaria’s caliber, such as Croatia, successfully placed issues. Then the political upheavals began, and even in the last days of the cabinet in June, Vassilev announced a plan to withdraw the loan as quickly as possible, but there was no time left for that.

The rough calculation shows that as a result of the tightening of monetary policy by the ECB and the rise in interest rates, the loss from the fact that this debt was not placed half a year earlier equals over BGN 100 million more per year in coupon payments emissions.

For comparison, for example, the achieved yields are above those at which Italian ten-year bonds are currently quoted (just under 4%), although in recent years Bulgaria could be financed significantly cheaper due to its more conservative fiscal policy and low indebtedness. Therefore, it is not excluded that the loosening of discipline in recent times will have an impact on the markets. Just weeks before the issue, acting finance minister Rositsa Velkova painted a picture of chronically high deficits in the coming years, even just on the basis of policies already in place.

The road ahead

In the coming months, the government is going to procure a little over BGN 2 billion on the domestic market according to the announced emission calendars until the end of the year, with the first auction announced for next Monday. This together with the BGN 1.8 billion already placed at the beginning of the year and today’s issue makes a total of about BGN 8.25 billion new debt, with a maximum of BGN 10.3 billion in the budget.

The article is in bulgaria


Tags: Bulgaria managed issue billion euros external debt albeit high cost

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