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According to the NBS and the Ministry of Finance, Serbia has achieved the most favorable financing price of 1,066 percent, which is the lowest interest rate so far.
As the NBS explains, although the bonds were issued in dollars, Serbia realized the so-called hedging operation, whereby it transferred the dollar liabilities and interest based on the bond to euro liabilities and thus protected this bond of the exchange rate risk of the movement of the euro against the dollar.
According to Jorgovanka Tabaković, the governor of the National Bank of Serbia, most of the funds of that bond (900 million dollars) will be reserved for the payment of the debt from 2011, that is, from the period in which, he says , Serbia borrowed at a rate of 7.25 percent through Eurobonds. .
– This transaction is another confirmation that international investors recognize our country as a safe place for investments – says Tabaković. – Each entry to the international market represents a test of investor confidence in the sustainability of macroeconomic stability, which is of special importance today because that confidence was earned in conditions where the world economy faces the greatest challenge since the Great Depression.
It is, therefore, a matter of refinancing the debt of a decade ago under much more favorable conditions. As economist Ivan Nikolic says, that is also the best way, whenever possible. According to him, the public debt is at this moment, despite the crisis caused by the coronary virus pandemic, below 60 percent, which is the limit of sustainable indebtedness.
The latest data from the Public Debt Administration of the Ministry of Finance show that public debt at the end of the third quarter of this year, on September 30, amounted to 25,195 million euros, and that its share in relation to GDP was 57 , 6 percent. The authorities expect public debt to reach 59% of public debt by the end of the year. We owe more in euros, about 40 percent, in dinars about 30, about 20 percent in dollars and the rest in other currencies.
– That is not something that should worry us, and the best indicator that this is the case is the high degree of investor interest in lending us their confidence that the Republic of Serbia is strong and reliable enough to pay this debt – explains Ivan Nikolić for “Novosti”.
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Demand for the bond, which was issued two days ago, was five times higher than previously issued, amounting to $ 6 billion, and around 200 investors from around the world were interested in that bond issue.
Finance Minister Siniša Mali stated that Serbia entered the international financial market for the second time this year with the issuance of this bond, emphasizing that demand for the supply is six times higher than the historical result for Serbia and its citizens.
– It informs you about the confidence that foreign investors have in Serbia and the economic policy that we follow, as well as the best indicator that the growth rate of gross domestic product (GDP), which will be the best in Europe this year, shows its result – said Mali. – Serbia could have saved 500 million euros and built, for example, five clinical centers for that money if the 2011 bond was issued at an interest rate of 2.125 percent.
The Mali minister says that after hedging the dollar in euros, a rate of 1,066 percent was obtained, stating that never before in the country’s history has there been such a low interest rate.
– We are not increasing public debt, we are repaying loans and paying back bonds that someone else took before us, and which are due especially in September 2021, and we are reducing the cost of our public debt – explained Finance Minister Siniša Mali. – I’m very proud of that. The correctness of our economic policy is confirmed by the international financial market, the London Stock Exchange and international investors.
NOT AN ABSOLUTE VALUE
There is NO absolute amount of debt, but it is seen in relation to GDP, that is, the state’s ability to pay it back – says economist Ivan Nikolić.
– That is why there are several billion in the near future of state debt, in the current situation there is also a greater willingness of the state to borrow and pay debts. The low figures for state debt since 2000, he explains, were mainly due to the agreement with foreign creditors to cancel a good part of our debt. The period up to the financial crisis of 2009 was marked by a moderate increase in indebtedness, and the needs of the State were met mainly by the privatization process and the influence of foreign currency, but also by the creation of an unrealistic dormant image. Since then, we started borrowing as a state and last year we significantly reduced our public debt.
EUROPEAN CREDITORS TO AMERICA
The list of creditors to whom Serbia currently owes more are the foreign governments to whom we owe 3.9 billion euros, the European Investment Bank, with which we have a debt of 1.218 billion euros, the Development Bank of the Council of Europe – 187 million euros, the European Bank for Reconstruction and Development – 78,289 million euros, the International Bank for Reconstruction and Development – 2,200 million euros. We owe € 163.5 million to the International Development Association, € 465.6 million to the IMF, € 868 million to the Paris Creditors Club and € 66.01 million to the German Development Bank. RS’s debt in Eurobonds is 4.9 billion euros.
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