The government has approved a public debt management program for the medium term (2023-2025).
The document establishes priority areas for the Ministry of Finance to determine the main and specific goals of the public debt management process, as well as the actions that will be taken by the authorities to ensure financing. The program describes strategies for financing the state budget deficit and identifies the main risk factors. The program involves several financing strategies based on various scenarios for the development of conditions in local and external markets. According to the baseline scenario (S1), in 2023 the state budget deficit will be covered by domestic financing (0.9% of GDP), external financing (4.2%), and other sources (0.8%). The share of net financing (external and internal) will decrease from 5.1% in 2023 to 4.5% in 2025. In 2023-2025 the government will continue to receive external loans: 58% of them will be used to support the budget, and about 42% to finance investment projects. About 5.6% of external government loans will be provided by bilateral creditors, 94.4% by multilateral ones. The main creditors will be: World Bank Group - 23.4%; IMF - 23.2%; European Union - 16.1%; Japan International Cooperation Agency - 11.2%; European Investment Bank - 10.2%; EBRD - 8.9%, etc. The maturity of new external loans will be at least 12 years and preference will be given to multilateral lenders. Activities in the domestic market will be aimed at maintaining and developing the government securities market. In this regard, the Action Plan for the development of the government securities market was approved, the main of which are: expansion and promotion of the government securities market; introduction of new financial instruments for debt management; continuation of the issuance of government bonds with a maturity of 2 and 3 years with a floating interest rate, as well as with a maturity of 2, 3, 5 and 7 years with a fixed interest rate. Also, the Ministry of Finance will continue operations for the re-opening of government securities (reopening), which have been successfully implemented since October 2018; in order to provide individuals with access to government securities and in order to diversify sales channels for government securities, by the end of 2023, will be implemented 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. To expand trading channels with government securities, transactions with government bonds will be allowed on the Stock Exchange of Moldova. In addition to the basic deficit financing strategy, two alternative scenarios are envisaged. The second scenario (S2) assumes a 6% decrease in the issue of government treasury bonds for 2023-2025, in parallel with an increase of 1 p.p. issuance of bonds with maturities of 2, 3, 5 and 7 years. Scenario S2 assumes that by the end of 2025, the public debt payable within a year will decrease by 3.8 percentage points, the average maturity of public debt will increase by 0.3 years, and the debt, which will be fixed at new interest rates, will decrease by 2.8 p.p. The second alternative scenario (S3) assumes entering the international financial market and issuing a Eurobond with a maturity of 7 years in 2025 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 forecast for 2025 (3.1% of GDP). This scenario will significantly improve the risk indicators associated with the government debt portfolio: government debt due within 1 year will decrease by 10.9 percentage points, the average maturity of government debt will increase by 1.3 years, debt that will be fixed at new interest rates, will decrease by 8.6 percentage points, and the share of government treasury bonds in the public debt will decrease by 11 percentage points. // 11.01.2023 — InfoMarket.
