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Government decides to increase external borrowing ceiling by EUR 4bn. It has consumed program resources for two years

de Adrian N Ionescu , 12.5.2019

The Government’s agenda for Wednesday also includes the draft decision to increase the foreign loans ceiling for 2019 and 2020 by EUR 4 billion, up to 31 billion, given that the previous ceiling has already been reached.

The Ministry of Public Finance (MFP) wants to issue new Eurobonds worth about EUR 8.25 billion, according to the explanatory memorandum.

On the other hand, the state will have to borrow this year about RON 72 billion (EUR 15.18 billion, at the new exchange rate forecasted by CNSP) to pay its debts, according to the calculations made by cursdeguvernare.ro, based on public information.

In its current form, Medium Term Notes (MTN) government bonds framework program regulates the possibility to issue bonds on foreign markets at a maximum amount, at any time, of EUR 27 billion or the equivalent in any currency.

The value of bonds issued and non-reimbursed (in euro and dollars) under the MTN Program is currently about EUR 26.9 billion.

“At present, the amount available for Eurobond issues under the Program is approx. EUR 0.022 billion,” says the explanatory memorandum.

They have consumed the “share” for two years

The document states that “in the context of the implementation of the annual plan for financing the budget deficit and debt refinancing for 2019-2020, the Ministry of Public Finance intends to issue Eurobonds worth approximately EUR 8,25 billion (equivalent) of which EUR 3.00 billion have been issued on April 03, 2019″.

“Consequently, in order to cover the financing needs of foreign markets for the period 2019-2020 and taking into account the amount remained available of EUR 0.022 billion, it is necessary to increase the total amount of the MTN Program by EUR 4 billion.

We mention that Eurobonds of EUR 3.5 billion (EUR 1.5 billion in November 2019 and EUR 2.0 billion in September 2020) will reach maturity between 2019-2020.

Since the MTN program ceiling is cleared at the time of the repayment of some bonds, the calculation for increasing the program ceiling has taken into account that these maturities occur at the end of each year, and the new Eurobonds issues are subject to market conditions, most likely in the first part of the year and the third quarter,” the Government says.

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