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Insights into Serbia’s guaranteed debt landscape: Balancing infrastructure investments

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The Ministry of Finance has recently disclosed updated figures regarding the movement of public debt, encompassing guaranteed debt, which includes loans procured by public enterprises and local governments with state backing for repayment.

As of the end of March this year, data from the Public Debt Administration reveals that the total amount of guaranteed debt stands at 212 billion dinars or 1.8 billion euros. Notably, the largest portion of guarantees has been allocated to Srbijagas, totaling 635.2 million euros, representing over a third of the overall sum. Following closely, Elektroprivreda Srbije (EPS) holds guarantees amounting to 544.8 million euros. The budget for 2024 outlines provisions for Srbijagas to receive 230 million euros in guarantees for financing capital investments aimed at enhancing the distribution network, including metering stations, as well as rehabilitating the gas pipeline system and bolstering gas transport capacity in Serbia.

Regarding Srbijagas’s existing repayment obligations, this year alone, the company needs to secure 177.5 million euros for the repayment of installments due on 25 active loans—a figure nearly equivalent to the total loans approved for infrastructure projects by the Chinese Export-Import Bank. Additionally, there’s approximately 1.1 billion dinars, representing the value of two loan installments in the domestic currency taken out by Srbijagas from AIK and UniCredit banks.

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Srbijagas predominantly secures loans from domestic banks, obtaining both domestic and foreign currency loans from various institutions such as Banca Intesa, OTP, NLB Komercijalna, Raiffeisen, and Banka Poštanska štedionica. These funds are utilized for projects such as constructing gas pipelines to neighboring countries and local gas pipeline expansions, as well as for liquidity requirements.

Conversely, EPS stands to benefit from state guarantees this year for financing various projects, including the revitalization of hydroelectric power plants and the construction of wind farms and hydroelectric facilities. Notably, the state is prepared to guarantee a loan from the Asian Infrastructure Investment Bank for the construction of a solar power plant.

In terms of EPS’s existing guaranteed debt, it amounts to a total of 544.8 million euros. This year, installments are due for loans aimed at liquidity, business improvement, and green energy capacities, among others, obtained from the European Bank for Reconstruction and Development and the European Investment Bank, totaling 60.7 million euros. Additionally, EPS will make payments toward a loan from the Japan International Cooperation Agency for the construction of desulfurization facilities.

Statistics on guaranteed debt also reveal significant amounts owed by railway companies and Serbian roads, with local self-governments also holding substantial guaranteed debt. The structure of guaranteed public debt, totaling 1.8 billion euros, comprises both external and internal debt, reflecting the government’s commitment to supporting key infrastructure and development initiatives.

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