/ world today news/ To some extent, I am even surprised that in the working report of the EC, so few things are indicated that Brussels has noticed as worrisome in the Bulgarian economy and finances. We as experts have been doing it for quite some time. And we can even be satisfied with the current document.
Another question is how we should interpret the conclusions in the report against the background of the upcoming new debt of 8 billion euros. There is no unequivocal answer.
First, part of the newly issued loan is to finance an old obligation. There is nothing to explain here. The only thing is under what conditions the new debt will be issued. Analyzing the state of the markets, we should achieve cheaper financing than we are paying now on the old debt.
But reports like today’s by the EC to a certain extent create problems for us, because in their conclusions a certain mistrust of the country is noticeable. This means that the risk of investing in Bulgaria increases, including and when government bonds are purchased and may give a minimal reflection on the price at which we would obtain the financing. As for the second part of the loan – there we have a real new debt, since it is a question of financing budget deficits. The 2015 budget provides for the corresponding amount to be provided. Deficits, as you know, are filled from two sources – one is privatization, the other is the issue of securities. We can conditionally divide the securities into two – one part is external and the other – internal debt. So we can finance part of the deficit in foreign markets, we can also through domestic markets. The question is how appropriateness will be assessed.
I venture to say that our internal debt is more terrible than the external. Therefore, if someone thinks that it is better to borrow on the domestic market, I will tell him that it is no less dangerous compared to external debt. Because in a situation of external indebtedness, as is the case with Greece, or as we were after the Lucan moratorium, what follows? We sit down at the negotiating table – we cry, we whine, we ask for our loan to be forgiven or restructured, and some of it just disappears. Remember, when we did the Brady deal with the London Club we de facto achieved a reduction of nearly 50% – straight-up forgiveness, restructuring, etc. But … there is no escape from internal debt. Yes, you can let the genie out of the bottle, ie. inflation. But who pays in the end – again the poor Bulgarian, the ordinary tax payer. It is quite possible that in this amount of BGN 16 billion, which the government wanted the parliament to agree to as an emission program, a part of the domestic debt was also included in it. With the idea of transforming it into an external one. Why didn’t the finance minister announce it? Well, not everything is said. Even in family life, small lies are preferable to bare truths…
I’m not saying that, I’m just suggesting that there might be such an option. Another possibility is to use part of this money to buy back a debt that matures after 2017 – with substitute persons, if it will be cheaper for us. I suppose that there may be some reservations, exactly in the spirit of this EC report. In case, as we promised, we invite external experts to evaluate the assets of the banks in our country and if it turns out that the audit is not very favorable – what do we do? There must be someone to save them, because the scenario with KTB is unlikely to be repeated.
If tomorrow it is necessary to save a bank by pouring liquidity into it, then you cannot run to the markets, you just have to have that readiness.
Such things are not commented on in the public space. Because everyone can interpret them as they see fit, some even panicking.
The journalists are right that the Minister of Finance spoke in slurs, gave evasive answers to your questions. But it is another matter that, if not live, he could at least gather the political leaders in a closed meeting and explain to them: this is actually the refinancing of the old debt, this is the restructuring of internal into external debt, this is an advance for other purposes under certain circumstances, if God forbid they happen, etc. And how they will talk to their deputies is another matter, but I am convinced – such analyzes are not for the general public. Because that’s what the markets are waiting for…
Will the government cope with these tasks? I think these tools are obsolete technologies. You even noticed that not only the four banks in the last loan will be dealers of future issues, contracts were also ratified there with other institutions and banks. Indeed, it is a long procedure, with many parties involved, but in the event that the hicks event becomes? And if there is no emission, they fall from the chain. Another issue is that our debt for 2016 and 2017 may not be what we are now calculating. New politicians may come, the current ones may come to their senses and say – no, we will not spend more than we create and give up budget deficits. Then the need to issue additional debt will simply disappear.
We now have to think about how to get out of deflation, and it is related to government spending, which means that we will not look for a balanced budget, but a new spending policy and invest where there will be a return, in a working economy.
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Prof. Stoyan Alexandrov, financier. He was the Minister of Finance in the period /1993-1994/.
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