The Government Incurs BGN 5 Billion in Foreign Debt
Bulgaria has sold Eurobonds on international markets for the first time since 2016, thus issuing a new external debt of BGN 5 billion. Two issues have been placed - 10 and 30-year securities. The yield on 10-year securities is 0.389%, and on 30-year bonds -1.476%, which is assessed as favorable.
Finance Minister Kiril Ananiev, who negotiated the sale, stressed that the procedure is within the approved ceilings for newly issued foreign government debt and government debt in general. They were increased in the first budget update reflecting the COVID crisis. Our country is entitled to a new debt of BGN 10 billion for the whole of 2020. BGN 1.2 billion must be removed from this ceiling. It was a debt issued at the beginning of the year on the domestic market and used to cover old debts.
"It was a big challenge for us to enter the market with 30-year-old securities for the first time in our history. The issue in its two tranches sparked unprecedented interest among investors, leading to requests that exceeded more than 4 times the volume we were seeking of BGN 2 billion. This gave us grounds to increase the emission limit from 2 to 2.5 billion euros, distributed in two tranches of 1.250 million euros each," Ananiev explained.
It became clear from the Finance Minister’s words that 16% of the total volume of the securities was acquired by Bulgarian investors. There were investors from Germany, the UK, the USA, the Netherlands, Switzerland, Belgium and others. Ananiev mentioned the involvement of central banks, state pension funds and other institutional investors.
The government does not plan to re-enter international markets until the end of this year. Kiril Ananiev confirmed initial expectations that the funds from the issuance of the new debt will be used to refinance old liabilities, increase the size of the fiscal reserve, ensure socio-economic measures and finance the planned budget deficit.