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Public debt in foreign currency rises to 78.2% of total debt

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At the end of January, the share of public debt in foreign currency in the total debt reached 78.2 percent, one percentage point higher than last year. According to the latest report from the Public Debt Administration, public debt in euros accounts for 57.2 percent of total indebtedness, in US dollars 13.7 percent, in SDR (Special Drawing Rights) 6.8 percent, and in other foreign currencies 0.5 percent. The remaining portion consists of domestic debt, accounting for 21.8 percent of external debt.

Serbia is primarily indebted through euro-denominated bonds, totaling 8.9 billion euros, a significant increase from 5.14 billion euros three years ago in January 2021.

However, there has been a decrease in the amount of long-term state securities issued in dinars, totaling 7.21 billion euros in January this year compared to 8.38 billion euros in January three years ago.

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In January, Serbia’s obligations to the Chinese Export-Import Bank increased to 2.7 billion euros, significantly higher than three years ago when it stood at 1.1 billion euros. Additionally, the debt to the European Bank for Reconstruction and Development rose to 53 million euros based on energy and infrastructure projects.

Moreover, obligations to the International Monetary Fund (IMF) increased by 33 million euros to a total of 2.4 billion euros. Negotiations with the IMF are ongoing, and more will be known about the results when the third review of the arrangement is released in a few weeks.

All these debts are denominated in foreign currency, with Serbia’s reliance on foreign currencies increasing steadily over the past few years. In January of last year, the share of public debt in foreign currency was 77.2 percent. Two years ago, in 2022, this share was even lower at 73.4 percent, while at the end of January 2021, it was 68.8 percent.

The trajectory of external debt is sensitive to potential shocks such as depreciation of the real exchange rate. Therefore, it is important to continue with cautious fiscal policy, maintain adequate reserves, and implement structural reforms to support external resilience, as highlighted in the IMF report.

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The IMF supports focusing on issuing long-term bonds denominated in dinars this year to increase non-resident participation, improve the currency mix of public debt, and extend the average maturity.

According to the Public Debt Administration report for January, eight-year maturity state securities were issued in the amount of 63.1 billion dinars, and three-year maturity euro-denominated securities were issued in the amount of 99.8 million euros. Additionally, funds were withdrawn in the amount of 18.7 billion dinars through project and program loans.

During the same month, obligations totaling 111.3 billion dinars were repaid, of which 58 billion pertained to the maturity of two-year maturity dinar-denominated securities.

The total turnover on the secondary market of dinar-denominated securities amounted to 31.7 billion dinars, while the turnover of euro-denominated securities had an equivalent value of 2.4 billion dinars.

Compared to the previous month, there was an increase in trading volume in the total turnover of dinar-denominated securities in January 2024, amounting to 21.3 billion dinars.

Benchmark bond trading, included in the J.P. Morgan GBI-EM Global Diversified Index and GBI Aggregate (GBI-AGG), accounted for 37.3 percent of total dinar-denominated securities trading in January 2024.

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