In 2023, as many as four billion euros in loans will come due in Serbia

Published on 21. September 2022., News

Serbia has a four billion euro loan due next year, and it will most likely be a challenge for the country.

Aleksandar Vučić, the president of Serbia, said from New York that he will talk with the head of the IMF, Kristalina Georgijeva, regarding the new arrangement with the IMF.

“That is important to us, to ensure more stability for Serbia, and that the public debt does not grow, to ensure where we can withdraw money for rollovers, since we have to pay back four billion at the beginning of next year or we have to make a mistake, so we have to find that money and we will find it. This is not a problem, our deficit would be below three percent this year if there were no problems with energy sources. The deficit would be slightly higher than one percent, if only there were no energy problems”, said Vučić.

Judging by the state of government bonds, those four billion principals still mature throughout the next year, but that does not make the task much easier. Namely, in the last ten days, the state had two auctions of 5.5 annual dinar bonds. Investors were looking for a yield of 6.8 percent, and in addition, 11.5 billion dinars were collected in those two auctions, while the planned volume of the auction was 18 billion dinars.

According to the economist Libek Mihailo Gajić, this is an indication that investors demanded a higher interest rate than the one the state was ready to accept in order to buy the entire bond issue.

About 2.8 billion euros of dinar bonds and about 470 million euros of bonds in euros issued on the domestic market will mature next year. The Eurobonds are not due due to the fact that in 2019 and 2020, the state prematurely bought the Eurobonds in dollars issued in 2011 and 2013, and the first subsequent Eurobonds are due in 2027.

The rest, up to four billion, are loans taken from foreign governments, banks and international financial institutions.

Slobodan Minic from the Fiscal Council points out that in addition to the refinancing of those four billion euros of principal, next year the state will also have to borrow for the deficit.

“With this year’s planned deficit and next year’s deficit planned by the Fiscal Strategy, although we will see how much will be planned in the budget, next year we will have to provide 5.5 to 6 billion euros.” We have already received three percent of the billion dollars, and we will see the rest. Currently, interest rates on the market are around six, seven percent. The question is what will it be like after the winter, when the energy crisis is over. “I expect that the state will try to prolong borrowing as much as possible in the expectation that interest rates will return to some extent”, Minic assesses.

Vučić also announced an arrangement with the IMF, but until now the Fund’s rule was that the money was not given to the budget, but to be used to finance the deficit of the balance of payments.

“I don’t expect any problems there, since we also have large foreign exchange reserves.” However, during the pandemic, the IMF also approved funds for fiscal use for the procurement of medicines and equipment during the corona virus”, says our interlocutor.

Although not everything is due for winter, the biggest blow to the budget will be in January. Five-year dinar bonds worth 100 billion dinars with a coupon of 4.3 percent mature at the end of January. Two days earlier, bonds in euros also mature, but only 50 million euros, which cost us 2.25 percent per year.

Judging by the statements of representatives of the state administration, the Arab loan will most likely be used to repay these bonds, Nova writes.

Download Article as PDF