19.09.2022

On 15 September the Ministry of Finance placed on the international capital markets EUR-denominated bonds in two tranches totalling EUR 2.25 billion. The first tranche is a 7-year tranche with an amount of EUR 1.5 billion and a coupon of 4.125%. The second tranche has a tenor of 12 years, its amount is EUR 0.75 billion and its coupon is 4.625%.

The issue is part of the GMTN programme for issuing debt on the international capital markets, with EUR 2.1 billion remaining to reach the Programme’s limit. The debt operation is within the maximum amount of BGN 10.3 billion for new debt that may be assumed in 2022 as set out in the Law Amending the 2022 State Budget of the Republic of Bulgaria Law. Until the issue the debt financing raised for this year had been BGN 1.8 billion and had been secured by placing GS on the domestic market in the period between March and May 2022. Taking account of the volume of Eurobonds issued, the total amount of government debt will reach BGN 34.5 billion (according to the national methodology), which accounts for 22.9% of the projected GDP for 2022. The Ministry of Finance does not plan another appearance on the international capital markets by the end of 2022.

The clear trend in the second half of 2022 in the European Union and globally of an accelerating inflation leading to tightening of the monetary policy of the central banks of big economies and the unfavourable prospects for a slow-down or decline of the economic activity are among the key factors determining the current status and the dynamics on the international financial markets where the transaction was concluded. In the coming months, the price and the access to debt financing will become a bigger and bigger challenge for sovereign debt issuers in view of the continuing geopolitical uncertainty, the high inflation and the policy of the European Central Bank and the Federal Reserve for a continuing increase in the basic interest rates.

This issue is one of the instruments for budget financing used by the Ministry of Finance by adhering to the main goal of debt management, i.e. financing of the planned deficit of BGN 6.2 billion (4.1% of GDP) for this year, ensuring the funds required for the refinancing of the outstanding debt and securing the fiscal reserve levels as regulated by law.

After the closing of the operation the Minister of Finance Rositza Velkova-Jeleva said: “Implementing this year’s budget as adopted by the national Assembly, the caretaker government is obliged to provide the liquidity required for securing the budgeted expenditures which, according to the plan, exceed the planned tax proceeds. The result we achieved as an issuer reflects the international market trends of rising prices of the cash resources in the context of a global economic and political uncertainty“.