12.02.2015

"The speculative debate conducted yesterday by the opposition is a cheap attempt to play politics with something that should not be used for playing politics just as the topic of external debt should not be talked about in an unprofessional way and should not be played demagogue". This is what Finance Minister Vladislav Goranov said after the meeting of the Budget and Finance Committee which considered the Bill Ratifying the Dealership Agreement between the Republic of Bulgaria as Issuer and Citigroup Global Markets Limited., HSBC Bank Plc., Societe Generale and UniCredit Bulbank AG as Joint Bookrunners and Dealers on Republic of Bulgaria's GMTN to the amount of EUR 8 billion signed on 6 February 2015. According to him, the "state should start spending as much as it earns so as not accumulate new debt, and the three-year budget forecast of the Ministry of Finance therefore envisages a plan limiting the amount of debt. "The social experiment made in 2013 and 2014 took us far away from this goal as the budget balance at end-2012 was negative, below 0.5 per cent of GDP, but the desire for more expenditures resulted in the fact that a deficit was opened and now we face an excessive deficit procedure which I hope we will jointly manage to avoid", said Minister Goranov before the members of Parliament.

"As long as Bulgaria generated deficits, this will mean new debt as there is no other instrument to cover the excess of expenditures over revenues", Minister Goranov said to the journalists following the meeting of the Budget and Finance Committee. "Making a forecast of how the state will secure medium-term financing is a sign of stability as we have a clear notion on how we will finance the debt of EUR 6 billion maturing in the next couple of years until 2017 and we forecast the instrument and the manner in which we will finance the existing budget deficit which is commutatively over EUR 3 billion over this period", explained Minister Goranov about the importance and priority of the bill proposed.

He added that the programme for assuming new debt by end-2017 was not new for the international financial markets and gave Poland as an example which has a similar programme and manages its government debt in a modern way for a long time now.

"This programme provides predictability and a possibility, even in case of instability, for the Government to have a mechanism for payment of its liabilities voted by the annual state budget law", Minister Goranov specified. Asked about the interest rate of 10%, he answered that "this amount of interest has been used as a benchmark in all issues since 2010, while the idea is to set a limit for the Government in its actions and to avoid directing those willing to finance the state to the real yield we expect".

The Finance Minister also shared his expectations that "the interest rates will be better than those so far because there is over-liquidity on the market now". "The MoF programme opens the maturity structure to the maximum by allowing the assumption of debt for 30 years while in the course of subscription it will be judged about the most profitable maturity and timing of securities so as to avoid, as it happened in this case, the concentration of maturity dates over a short period of time, i.e. 2 or 3 years", Mr. Goranov added.

"Today's debate about the new government debt does not take account of the fact that the net debt increment in this period will just be the amount of the deficit and even less", Mr. Goranov highlighted. He also said that "it is an issue of necessity and judgement who we select to "be an advocate" of the Bulgarian state when it makes a debt issue". There is no impediment to sign a long-term agency agreement, and the judgement as to why these four banks have been selected and whether they are the most appropriate ones has been made on the basis of the global banks that at the end of last year agreed to support the Government with a bridge facility with which we managed to pay out the citizens' guaranteed deposits in the bankrupt CCB. Minister Goranov reminded that part of the condition of those banks then was after granting the bridge financing to head towards this type of instrument, i.e. an issue programme over the next couple of years.

"The good communication with those banks and their prestige guarantee that we will manage to attract the investors' interest and to get a very good yield on the markets, and over the next couple of months we will be assured of this", Minister Goranov added. "Let everyone that obstructs the prestige of global financial institutions, refer their specific claims to them", said the Finance Minister and reminded that all bill papers were public and were uploaded on the website of the National Assembly.