Serbia used a three-part international bond transaction in the spring of 2026 to refinance near-term liabilities, extend the maturity of its debt and broaden the range of investors financing the state. The operation improved the government’s repayment profile, but the yields paid also demonstrated that external borrowing remains materially more expensive than before the global tightening cycle.
The government issued approximately €3bn equivalent across euro- and dollar-denominated instruments. Demand exceeded €8bn, giving the transaction an aggregate subscription ratio of more than 2.6 times.
The shortest tranche was a €1bn conventional eurobond due in 2031, carrying a coupon of 4.25 per cent and issued at a yield of 4.397 per cent. Serbia also sold a $1.25bn bond due in 2036 with a 5.5 per cent coupon and a yield of 5.814 per cent. After the dollar proceeds and liabilities were swapped into euros, the effective euro coupon was approximately 4.66 per cent, limiting the government’s exposure to movements in the dollar.
A third tranche consisted of a €900mn green bond due in 2038, with a coupon of 4.875 per cent and an issue yield of 5.173 per cent. Its proceeds are intended to finance or refinance eligible environmental and social expenditure under Serbia’s sovereign sustainable-finance framework.
Part of the new borrowing was used to repurchase €870.8mn of an existing eurobond due in 2027. The tender reduced the outstanding amount of that bond to about €1.13bn, transferring a significant portion of the repayment obligation into the next decade.
The transaction therefore represented more than deficit financing. It lowered the refinancing concentration around 2027, established additional pricing points on Serbia’s sovereign yield curve and combined conventional, green and currency-swapped issuance in a single market operation.
Serbia entered the transaction with comparatively moderate public debt. At the end of May, central government debt stood at €41.14bn, equivalent to 43.7 per cent of GDP. General government debt, which also includes relevant local-government obligations, was €41.44bn or 44 per cent of GDP.
The ratio remains comfortably below the levels recorded during the pandemic and below the Maastricht reference value of 60 per cent. This provides the government with room to finance infrastructure and Expo 2027-related investment without creating an immediate debt-sustainability problem. Nominal GDP growth and the broadly stable dinar have also helped contain the debt ratio.
The structure is less benign than the headline level. Approximately 79.7 per cent of central government debt is denominated in foreign currencies. The euro accounts for 62.9 per cent, the dinar 20.3 per cent, the dollar 11.3 per cent and special drawing rights 5.3 per cent. Currency swaps reduce some dollar exposure, but the debt stock remains sensitive to the dinar-euro relationship.
About 67.2 per cent of debt carries fixed interest rates, leaving 32.8 per cent at variable rates. Within the variable-rate component, 72 per cent is linked to Euribor, 16.3 per cent to SDR-related rates and 11.6 per cent to Belibor. Declining European interest rates would gradually reduce this burden, while a renewed inflation or rate shock would feed into debt-service costs.
The domestic market remains important but comparatively shallow. Outstanding government securities included about RSD788bn of dinar bonds and €1.74bn of euro-denominated domestic bonds at the end of May. Non-resident investors held RSD97.8bn, or 12.4 per cent, of dinar securities.
A stronger domestic institutional-investor base would allow the state to issue longer-dated dinar debt and reduce its dependence on international markets. For now, external bonds, multilateral loans and project financing remain central to the sovereign funding model.
Fiscal execution will determine how successfully the government uses the space created by the refinancing. The general government recorded a deficit of RSD106.5bn in January-May, as expenditure growth of 12.5 per cent outpaced the 9.9 per cent increase in revenue. Heavy capital expenditure can support future growth, but recurrent spending or project overruns would leave a larger debt stock without a corresponding improvement in productive capacity.
The bond operation reduced near-term rollover risk and confirmed Serbia’s access to global capital. Its longer-term value will depend on whether the borrowed funds generate infrastructure, productivity and export capacity sufficient to compensate for coupons of roughly 4.3 to 4.9 per cent in euro terms.
