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Monday, April 22, 2024
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Montenegro Government contemplates €500 million bond issuance amidst financial strategy shift

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The Government, in its latest session, gave consent to the Ministry of Finance to initiate the borrowing procedure. However, this information was of an internal nature, as were all previous ones in the government of Milojko Spajić concerning state borrowing.

The Ministry of Finance (MF) is preparing to borrow 500 million euros through the issuance of bonds, confirmed several sources to “Dan” newspaper. The Government, in its latest session, gave consent to the Ministry of Finance to initiate the borrowing procedure. However, this information was of an internal nature, as were all previous ones in the government of Milojko Spajić concerning state borrowing.

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“Dan” initially received unofficial information that the Government borrowed 500 million euros, but the Ministry of Finance stated that no arrangements for funding the budget had been realized this year. Subsequently, we received information about a planned borrowing of half a billion, which the Ministry of Finance neither confirmed nor denied.

“The Budget Law for 2024 allows borrowing up to 650 million euros to cover the budget deficit in 2024 and borrowing up to 500 million euros for debt refinancing and creating a fiscal reserve for 2025. This can be done through credit arrangements with international financial institutions, domestic and/or foreign banks, issuing state securities and/or bonds on domestic and/or international markets, as well as through bilateral or other credit arrangements.”

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It is important to note that, in accordance with the Budget Law for 2024, funds obtained through borrowing will be used exclusively for servicing existing debt, financing the capital budget, and creating a fiscal reserve for the next year. No new budgetary expenses will be financed through borrowing, except for the capital budget, adhering to the golden rule of the budget – that all current obligations are financed from current revenues.

“The Ministry of Finance is considering the possibility of issuing bonds and entering into arrangements with international financial institutions and commercial banks to make informed decisions in the future, depending on market conditions, about the scale and timing of arrangements for budget financing. The Ministry of Finance is monitoring developments in the international market to determine the most favorable moment to enter the market for potential bond issuance,” said the Ministry of Finance.

Prime Minister Spajić stated about ten days ago that the Ministry of Finance should monitor market developments daily and borrow at the best moment.

“We have over 400 million in old debts, and next year another half a billion. In such a situation, Montenegro needs to enter the market and borrow to service its obligations. The budget includes borrowing, i.e., the exact amount is defined, and when it will happen is less important. What matters is the market situation, supply, demand. We need to look for a good moment to do it,” Spajić said recently at a press conference at the Central Bank during the visit of an IMF delegation.

He emphasized that the government of Zdravko Krivokapić, when he was the Minister of Finance, borrowed 750 million at the end of December 2020 because it was a good moment.

“At that time, Romania and Serbia issued bonds, there was a wave, so we followed. There was high liquidity and low-interest rates. The Ministry of Finance must constantly monitor the market. Every morning they need to know the supply, demand, liquidity, who issued bonds in the region, and the like. So, every morning before coffee, they must know the situation in markets worldwide,” Spajić said at that time.

The government of Milojko Spajić began its mandate at the end of October, and by New Year, they had borrowed 159 million, of which 109 million were secretly borrowed from commercial banks.

GP URA official Miloš Konatar asked Spajić if the announcements about borrowing another 700 million euros for the state were accurate. As he pointed out then, if the announcement is accurate, with the previous 159 million, it amounts to 859 million euros in just 100 days of the government.

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