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New Attempt of Bulgaria to Issue Debt of up to 2 Billion Euros on External Markets


It seems Bulgaria will make a new attempt to place a government bond issue on the external markets. The idea refers to the debt issue of up to 2 billion euros through the disposal of 10-year and 30-year securities. According to unofficial information, The Minister of Finance Kiril Ananiev has held a conference call with potential investors. The collection of offers is expected to begin very soon.


The initial attitude pointed that as early as the beginning of May Bulgaria will try to raise over 2 billion euros through the sale of a global bond issue. But then the government gave the idea up in anticipation of better market conditions.

According to Reuters, the cabinet has selected four banks to manage the sale of the securities - Citi, JP Morgan Chase & Co, BNP Paribas and UniCredit. The selection is not random, as the same group managed the last global bond sale - in 2016.

The government is likely to finance the expected budget deficit at the end of 2020 with the sum of 2 billion euro in case of a successful end to the procedure. After the budget update around the beginning of the COVID crisis it was recorded that the Treasury will end the year with 3.5 billion euros deficit due to shrinking revenues and higher expenditures. As of the end of August, however, the budget still has a surplus of over BGN 1.5 billion.

 

It is clear from the MF's estimates that a high fiscal reserve continues to be maintained - as of July 31, it was 10.14 billion euros including BGN 9.78 billion deposits of the fiscal reserve in BNB and banks and BGN 0.36 billion receivables from the European Union Funds. It is therefore not fully clear whether the funds from the potential sale of bonds will serve as running costs or be used as a buffer.

 

The State Budget Act states that this year the government may increase the government debt to BGN 10 billion. However, BGN 1.2 billion must be withdrawn, which have been accumulated from the domestic market since the beginning of 2020 and have been used mainly to repay old debts.

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