The government has approved a public debt management program in the medium term (for 2022-2024).
As the head of the Ministry of Finance Dumitru Budianschi reported, this program sets the main and specific goals of the Ministry of Finance in the process of public debt management, and also determines the actions that are planned to be taken to improve public debt management. The program stipulates three financing strategies that will be applied, depending on possible scenarios for the development of the situation in the domestic and foreign markets. According to the baseline scenario (S1), in 2022 the state budget deficit will be covered by domestic financing (1.8%), external financing (3.6%), and other sources (0.5%). The share of net financing (external and internal) in the next 2 years will decrease from 5.4% in 2022 to 3.3% - in 2024. In 2022-2024 the government will receive proceeds from external state loans, of which, on average, 45% will be used to support the budget, and about 55% to finance investment projects. About 0.7% of external government loans will be provided by bilateral lenders, and 99.3% by multilateral institutions, and the main lenders will be: the World Bank Group - 27.5%; IMF - 21.9%; EIB - 17.9%; EBRD - 16.2%; EU - 9.6%; Development Bank of the Council of Europe - 3.6%; International Fund for Agricultural Development - 0.7%; Japan Agency for International Development - 0.7%; others - 1.9%. To ensure domestic financing in the primary market, the Ministry of Finance will extend the maturity of government securities issued on the market, and, depending on investor demand, will increase the share of government securities with a long circulation period; will continue to issue government bonds with a maturity of 2 years with a floating interest rate, 3, 5 and 7 years with a fixed interest rate and will analyze the possibility of issuing government bonds with a maturity of 10 years, with a fixed rate. Also, the Ministry of Finance will continue operations for the re-opening of government securities, which have been successfully implemented since October 2018; will ensure the use of operations for the administration of liabilities, such as early buy back or switch operations; diversifies the channels for selling government securities, and by the end of 2022 will introduce a platform for direct sales of government securities to individuals. In the secondary market, the introduction of the E-Bond electronic trading platform will continue, which will have a significant impact on the transparency of the pricing process. At the same time, the Ministry of Finance provided two alternative scenarios for financing the state budget deficit (S2 and S3). One of them assumes a moderate increase in net domestic financing, an increase in the share of government securities issued and a gradual diversification of instruments through the introduction of retail government securities. It assumes a 6% decrease in the issuance of Government short-term bonds for 2022-2024, in parallel with an increase in the issuance of bonds with a maturity of 2, 3, 5 and 7 years, with a fixed interest rate. This scenario assumes that in 2022-2024 net domestic financing will increase by 50 million, 75 million and 100 million lei, respectively. As a result, by the end of 2024, the public debt payable within a year will decrease by 3 p.p., the average maturity of public debt will increase by 0.2 years, the debt, which will be fixed at new interest rates, will decrease by 3.1 p.p. The second alternative scenario involves entering the international financial market and issuing a Eurobond with a maturity of 7 years in 2023 for a total amount of $500 million in order to increase the maturity of the portfolio, diversify the investment base, and also cover the deficit of external resources that were forecasted for 2023 (1.6% of GDP). In this case, it will be possible to improve the risk indicators associated with the public debt portfolio, since the public debt due within 1 year will decrease by 8.9 percentage points, the average maturity of public debt will increase by 1.2 years, and the debt that will be fixed at the new interest rates, will decrease by 8.7 percentage points, and the share of Government short-term bonds in the public debt will decrease by 6.3 percentage points.// 16.02.2022 — InfoMarket
