ANALYSIS OF THE REPUBLIC OF SERBIA S DEBT. March 2013

Transcription

1 ANALYSIS OF THE REPUBLIC OF SERBIA S DEBT March Belgrade, May

2 Contents А. External debt... 3 B. Public debt... 6 Annex 1. External debt of Republic of Serbia... 9 Annex 2. Stock and flow of external debt Annex 3. Disbursements, repayments of principal and interest on long-term foreign loans of the private sector ii

3 А. External debt Up by EUR 1,001.4 mln or 3.9% on end-december, external debt of the Republic of Serbia amounted to EUR 26.7 bln in March. The increase in external debt in Q1 was driven by government borrowing in the international financial market. Private sector debt, on the other hand, decreased. Depreciation of the euro against other currencies pushed up external debt by EUR mln. Debt by original maturity is considered favourable relative to December 2012, the share of short-term in total external debt fell by 0.6 pp to 1.3% at end- March. The debt structure by remaining maturity also improved the share of short-term debt fell by 0.8 pp from December to 17.0% by end-march. The external debt to GDP ratio, as the main indicator of the country s external solvency, rose by 1.4 pp from Q to 87.3% in Q1. The ratio of external debt to 12-month exports of goods and services 1 reached 175.7% including remittances 2, or 216.2% excluding them. External debt repayments came at 12.9% of estimated GDP in Q1, of which 10.3% related to principal and 2.6% to interest payments. The debt service ratio indicating external liquidity the ratio of external debt repayments to annual exports of goods and services came at 33.0% at end-q1. Inclusive of remittances 2, this ratio equalled 27.1%. 1. External debt of the public sector 3 came at EUR 13.5 bln at end-march, up by EUR 1.3 bln on December. It share in total external debt reached 50.5% by end-march. Government external debt amounted to EUR 10.8 bln, while government-guaranteed external debt totalled EUR 1.4 bln, and NBS debt EUR 1.3 bln. New public sector borrowing equalled EUR 1.4 bln in Q1, with EUR mln repaid on account of principal. Public sector debt increased also on account of cross-currency changes (EUR mln). 2. External debt of the private sector amounted to EUR 13.2 bln at end-march, down by EUR mln from the quarter before as a result of debt conversion into equity (EUR 13.3 mln), principal repayments exceeding the disbursement of long-term loans (EUR mln) and net short-term repayments by banks (EUR mln). In contrast, cross-currency changes the private sector debt pushed upwards (EUR 75.4 mln). Chart 1 External debt by debtor (ЕUR bln) March Оther priv ate - lef t scale Banks - left scale NBS - left scale Republic of Serbia - left scale Total external debt in % of GDP - right scale (in %) Sources: RS Ministry of Finance and Economy and National Bank of Serbia. 100 Net repayments exceeded disbursements of longterm foreign loans in the financial sector (EUR mln), retail and wholesale trade (EUR 64.9 mln), information and communications (EUR 24.7 mln) and other sectors (EUR 9.5 mln). Net borrowing exceeded repayments in manufacturing (EUR 29.9 mln), real estate business (EUR 18.3 mln) and transportation and storage (EUR 10.7 mln) Under World Bank estimates, 220% indicates the level when the country faces the risk of external debt sustainability. 2 According to the World Bank methodology presented in the publication World Development Indicators, debt repayments can be analysed in relation to exports of goods and services, inclusive of remittances if they represent a stable and significant inflow. 3 Following the IMF s methodology, the Republic of Serbia s external debt of the public sector includes old rescheduled debt, new government and government-guaranteed debt, NBS liabilities, non-regulated RS liabilities under clearing debt, and a portion of non-government guaranteed debt of the local government and government funds. 3

4 2.1. External debt of the banking sector reached EUR 3.8 bln at end-march, down by EUR mln from the previous quarter, as a result of a decrease in long-term debt by EUR mln and short-term debt by EUR mln. In Q1, banks concluded long-term loans in the amount of EUR 7.5 mln, at the average interest rate of 2.0% and the maturity of 2.3 years. Of these loans, 73.3% were contracted at a variable interest rate External debt of enterprises and other debtors stood at EUR 9.4 bln at end-march. It contracted by EUR 27.4 mln in Q1, reflecting mainly movements in long-term debt. Chart 2 Republic of Serbia's external debt by foreign creditor (as at 31 Маrch ) 2.5% 5.4% 5.4% IFIs Paris Club 44.2% 30.0% 12.4% 0.1% Foreign governments and development banks London Club Other creditors Eurobonds Debt in non-convertible currency Source: NBS. Table 1 Indicators of Serbia' external position External liquidity indicators (in %) I Foreign reserves/imports (in months) Foreign reserves/short-term debt , , ,285.1 Foreign reserves/gdp Debt repayment/gdp Debt repayment/exports Debt repayment/exports and remittances External solvency indicators (in %) External debt/gdp Short-term debt/gdp External debt/exports External debt/exports and remittances Source: National Bank of Serbia. Methodological explanations: - Foreign reserv es/imports of goods and serv ices (in months) - ratio of f oreign reserv es at the end of the period observ ed and the av erage monthly imports of goods and serv ices during the same period. - Foreign reserv es/short-term external debt ratio of the stock of f oreign reserv es and the stock of short-term external debt at the end of the period observ ed. - Foreign reserv es/gdp ratio of the stock of f oreign reserv es at the end of the period observ ed and GDP in the last f our quarters. - External debt repay ment/gdp ratio of external debt repay ment and GDP during the period observ ed. - External debt repay ment/exports of goods and serv ices ratio of external debt repay ment and exports of goods and serv ices during the period observ ed. - External debt repay ment/exports of goods and serv ices plus remittances ratio of external debt repay ment and exports of goods and serv ices plus remittances during the period observ ed. - External debt/gdp ratio of the stock of external debt at the end of the period observ ed and GDP in the last f our quarters. - External debt/exports of goods and serv ices ratio of the stock of external debt at the end of the period observ ed and the v alue of exports of goods and serv ices ov er the last 12 months. - Short-term external debt/gdp ratio of the stock of short-term external debt at the end of the period observ ed and GDP in the last f our quarters. - External debt/exports of goods and serv ices ratio of the stock of external debt at the end of the period observ ed and the v alue of exports of goods and serv ices ov er the last 12 months - External debt/exports of goods and serv ices plus remittances ratio of the stock of external debt at the end of the period observ ed and the v alue of exports of goods and serv ices plus remittances ov er the last 12 months. 4

5 In Q1, enterprises and other debtors concluded longterm loans worth EUR mln, at the average interest rate of 3.2% and the maturity of 5.6 years. Of these loans, 93.3% were contracted at a variable interest rate. 3. Total repayments of principal and interest in the remaining three quarters of are planned at EUR 4.1 bln EUR 3.5 bln relating to principal and EUR mln to interest. Total repayments of public sector debt are planned at EUR 1.6 bln, while those of the private sector at EUR 2.5 bln (banks EUR mln, enterprises and other debtors EUR 1,642.3 mln). 5

6 B. Public debt At end-march, public debt of the Republic of Serbia 4 amounted to EUR 19.4 bln, up by EUR 1.7 bln on end The share of public debt in estimated GDP thus increased by 2.9 pp to 62.2%. 6,7 As in the previous quarter, the strongest boost to public debt growth came from the sale of eurobonds in the international financial market. Eurobonds pushed up external public debt by EUR 1.5 bln and internal by EUR mln. External public debt recorded a notable increase in February, when another auction of government securities was held in the international financial market the Republic of Serbia sold the seven-year bond (Eurobond 2020) worth USD 1.5 bln, at 5.15% (coupon rate 4.875%). This time again, investor demand exceeded supply several times. With previous eurobond sales (Eurobond 2017 and Eurobond 2021), the stock of public debt equalled EUR 3.2 bln at end-q1. The Q1 increase in internal public debt reflected chiefly the net sale of government securities. What is positive is that dinar securities drove debt up (RSD 25.7 bln), while euro securities dragged it down RSD mln or EUR 4.1 mln). Also, a positive tendency from the previous quarter continued debt increased on the back of long-term (RSD 29.8 bln), while declining on account of short-term dinar securities (RSD 4.1 bln). The government also reduced its liabilities under frozen FX savings and to commercial banks, by EUR 3.5 mln and EUR 3.0 mln respectively. Public debt received a significant boost in Q1 from government indirect liabilities (EUR mln), notably those in respect of guarantees for external borrowing (EUR mln). government borrowing in the international financial market through the sale of eurobonds. The share of dinar in total public debt shrank by 0.5 pp, to 18.5%. Though the government s long-term commitment is to provide necessary financial resources mainly by borrowing in the domestic financial market through the issue of dinar securities, the situation required borrowing in the international financial market. As eurobonds issued in February are dollardenominated, the share of dollar debt in total public debt expanded by 4.6 pp to 27.4%. On the other hand, the share of debt in other currencies declined to 47.5% in EUR, 5.1% in SDR, 1.0% in CHF, and 0.5% in other currencies. Chart 3 Public debt of the Republic of Serbia (ЕUR bln) March Internal debt - left scale External debt - left scale Public debt as % of GDP - right scale (in %) Sources: RS Ministry of Finance and Economy and National Bank of Serbia Like in the previous quarter, Q1 saw deterioration in the currency structure of public debt because of 4 Public debt of the Republic of Serbia is shown by the methodology of the RS Ministry of Finance and Economy. Following that methodology, external public debt does not include NBS liabilities, non-regulated RS liabilities including clearing debt, and a portion of debt of the local government and government agencies that is not government-guaranteed. 5 As of September 2012, public debt statistics of the Ministry of Finance and Economy show securities at the nominal value. In accordance with this change in methodology, the NBS made a backward adjustment of the stock of public debt. 6 In its quarterly monitoring of the share of public debt in GDP during the year, the NBS follows standard international practice and observes public debt in relation to GDP estimated for the last four quarters. 7 According to data of the Ministry of Finance and Economy, the share of public debt in estimated GDP equalled 57.7% at end-march. The difference relative to the NBS figure is due to differing estimates of nominal GDP. 6

7 Table 2 Stock of Republic of Serbia's public debt (EUR bln) 1. Internal debt External debt TOTAL (1+2)* * Any potential differences in the sum amount are due to rounding to one decimal place. Sources: RS M inistry of Finance and Economy and National Bank of Serbia Q1 The sale of eurobonds also brought about a change in the interest rate structure of public debt at end- Q1. The share of debt at fixed interest rates increased by 1.2 pp to 73.1%. A major part of the 26.9% of variable-rate debt was linked to the euro EURIBOR and LIBOR (75.0%), followed by other variable rates (11.8%), US dollar and Swiss franc LIBOR (11.4% and 1.8% respectively). Because of the public debt increase in Q1, measures of sustainability observing the stock of public debt deteriorated from the quarter before. The share of public debt in estimated GDP and exports of goods and services (also inclusive of remittances) increased, though relative to 2012 an increase was noted for estimated GDP over the last four quarters and exports of goods and services in the last 12 months (also inclusive of remittances). The share of public debt in budget revenue exacerbated owing to rising public debt and weaker budget revenue. Measures of sustainability observing public debt repayments also deteriorated relative to the previous year. Substantial public debt repayments in Q1 brought about a rise in their share in estimated GDP, exports of goods and services (also inclusive of remittances). Weaker budget revenue and higher public debt repayments worsened the sustainability indicator which observes their ratio. The share of government securities sold in the domestic market fell by 0.9 pp to 22.8% in Q1. In the government securities portfolio, the share of long-term dinar securities rose to 73.9%, the share of short-term dinar securities fell to 4.9%, and that of euro-denominated ones to 21.2%. Chart 3 Measures of public debt sustainability (in %) Debt/GDP Debt/exports Debt/exports and remittances Debt/budget revenue Debt repayment/gdp Debt repayment/exports Debt repayment/exports and remittances Debt repayment/budget revenue Sources: RS M inistry of Finance and Economy and National Bank of Serbia M ethodological explanations: - Public debt/gdp ratio of the stock of public debt at the end of the period observed and GDP in the last four quarters. - Public debt/exports of goods and services ratio of the stock of public debt at the end of the period observed and the value of exports in the last 12 months. - Public debt/exports of goods and services plus remittances ratio of the stock of public debt at the end of the period observed and the value of exports and remittances in the last 12 months. - Public debt/budget revenue ratio of the stock of public debt at the end of the period observed and budget revenue in the last 12 months. - Public debt repayment/gdp ratio of public debt repayment and GDP during the period observed. - Public debt repayment/exports of goods and services ratio of public debt repayment and exports of goods and services during the period - Public debt repayment/exports of goods and services plus remittances ratio of public debt repayment and exports and remittances during the period observed. - Public debt repayment/budget revenue ratio of public debt repayment and budget revenue during the period observed. Q1 7

8 During Q1, dinar securities worth nominal RSD 96.3 bln were sold (of total RSD bln issued) and securities worth RSD 74.4 bln fell due. Q1 saw a further decline in interest rates on dinar government securities. The decline was initiated in the previous quarter with the stabilisation of the dinar exchange rate, adoption of the fiscal consolidation plan, and amplified liquidity in the international capital market. Interest rates declined also on account of the sale of eurobonds in the international market, which helped ease the pressure for the collection of funds in the domestic market. Interest rates of all maturities fell more than 1.8 pp. The weighted average rate lost 2.1 pp and came at 10.4%. At end-q1, rates on dinar government securities ranged from 9.45% for six-month maturity to 12.65% on new, seven-year securities, which resulted in lengthening of the dinar yield curve. Elevated non-resident demand for dinar government securities resulted in the sale of entire issues at the majority of auctions, which is why the performance ratio rose by almost 13 pp, to 87.6%. Q1 saw three auctions of euro-denominated securities, at full performance and rates of 3.9% for one-year and 4.9% for two- and three-year maturity. Compared to previous auctions, one- and three-year rates 8 lost 1.8 pp and 0.1 pp respectively, while the rate on twoyear maturity stayed flat. At auctions held in Q1, securities were sold at nominal EUR mln, while securities due were worth EUR mln. Chart 5 Rates on government securities issued in the domestic financial market and NBS key policy rate (in %) Key policy rate NBS Short term T-bills in RSD Medium term T-bills and bonds in RSD Long term bonds in RSD Medium term T-bills and bonds in EUR Long term bonds in EUR Source: Ministry of Finance and Economy. Chart 4 Maturity structure of public debt under sold government securities (RSD bln) Long term bonds in EUR Medium term T-bills and bonds in EUR Long term bonds in RSD Medium term T-bills and bonds in RSD Short term T-bills in RSD Source: Ministry of Finance and Economy. 8 The previous, three-year auction was held in May 2011, while the one-year auction was held in October

9 Annex 1. External debt of Republic of Serbia (preliminary data as at 31 March ) Sector / Creditor Outstanding debt (principal) Principal arrears Interest arrears Late interest in EUR mln USD/EUR= Total =1+3+4 TOTAL EXTERNAL DEBT 26, , , PUBLIC SECTOR 13, , Medium and long-term debt 13, , Monetary authority National Bank of Serbia 1, ,304.4 IMF 1, ,245.5 China restructured f inan. loan worth USD 100 mln General government 12, , Central government total 11, , Central government debt 10, ,585.3 Multilateral institutions 3, ,823.1 IMF SDR allocation IBRD consolidated debt 1, ,025.2 IBRD IDA European Community EIB EUROFOND-CEB EBRD Foreign gov ernments and gov erments' dev elopment banks 2, ,349.9 Paris Club consolidated debt1) 1, ,450.1 o/w capitalised interest2) Gov ernments Gov ernments Liby a Gov ernments' dev elopment banks London Club regulated debt3) Eurobonds 3, ,318.8 Other creditors o/w IBRD guarantee Debt in non-conv ertible currency Central government guaranteed debt 1, ,289.5 Multilateral institutions EUROFIMA EBRD EIB Gov ernments' dev elopment banks Gov erments Other creditors Government funds and agencies Other creditors non-guaranteed debt Local governments total Local governments non-guaranteed debt EBRD Other creditors Local governments guaranteed debt EIB EBRD Short-term debt

10 2. PRIVATE SECTOR* 12, , , Medium and long-term debt 12, , , Banks 3, ,530.4 International f inancial organisations 1, ,048.2 EIB EBRD EFSE IFC EUROFOND-CEB Gov ernments' dev elopment banks Other creditors 2, , o/w MIGA insurance Enterprises 9, , ,347.7 International f inancial organisations EBRD IFC EIB EUROFOND-CEB Gov ernments Gov ernments' dev elopment banks Other creditors 8, , , o/w MIGA insurance Other Sectors Other Creditors Short-term debt Banks Bank deposits and credit lines Enterprises Other creditors Russia trade debt f or gas import Source: National Bank of Serbia. NOTE: In September 2010 the methodology of external debt statistics was changed and external public debt includes obligations under the IM F SDR allocation (EUR mln), which was used in December 2009, as well as capitalised interest to the Paris Club creditors (EUR 25.1 mln), while the loans concluded before 20 December 2000, under which the payments have not been effected, are excluded from external debt of the private sector (EUR mln of which EUR mln relate to domestic banks and EUR mln to domestic enterprises). *Arrears are most likely ov erestimated due to the f ailure to submit data in time. 1) Debt owed to the Paris Club creditors was consolidated in 2001 when it was agreed that 66% of debt will be cancelled; the first phase of reduction of 51% of debt was implemented on 22 M arch 2002, while the second phase of reduction of additional 15% of debt was implemented on 6 February ) Pursuant to the provisions of the Agreed M inute signed with the Paris Club creditors, in the period M arch 2002 December 2005, 60% of interest was capitalised and will be serviced from 2007 to ) In accordance with the M emorandum of Understanding on Debt Restructuring, signed by the Republic of Serbia on 7 July 2004 with the London Club creditors, approximately 62% of debt was cancelled. 10

11 Annex 2. Stock and flow of external debt (January March, including January March 2012 and total 2012) Total 2012 Jan. 13 Feb. 13 March 13 in EUR mln* Total Jan-March (3 to 5) Foreign net loans 1, , A) Medium/long term, net (1.- 2.) 1, , Disbursements ( ) 5, , , of f icial 2, , , o/w IMF priv ate ( ) 2, banks other priv ate 2, other priv ate borrowing f rom non-resident banks Amortisation - principle ( ) 3, of f icial o/w IMF priv ate ( ) 2, banks other priv ate 2, other priv ate borrowing f rom non-resident banks 1, Amortisation - interest ( ) of f icial o/w IMF priv ate ( ) banks other priv ate other priv ate borrowing f rom non-resident banks B) Short term, net (1.+ 2.) of f icial, net priv ate, net ( ) banks, net ( ) other short term credits, net deposit and credit lines, net other priv ate, net Dec. 31, 2011 Dec. 31, 2012 Jan. 31, Feb. 28, Mar. 31, in % GDP Mar. 31, in million EUR* Change in (5-2) Stock of external debt 24, , , , , % 1, A) Of f icial (1.+ 2.) 10, , , , , % 1, Medium/long term 10, , , , , % 1, Short term % 0.00 B) Priv ate 13, , , , , % Medium/long term 12, , , , , % Short term % Banks (1.+ 2.) 4, , , , , % Medium/long term 3, , , , , % Short term % Other priv ate (1.+ 2.) 9, , , , , % Medium/long term 9, , , , , % Short term % Source: National Bank of Serbia. * f /x on date of transaction. PRELIMINARY DATA 11

12 Annex 3. Disbursements, repayments of principal and interest on long-term foreign loans of the private sector (by economic sector, 1 January 31 March ) in EUR mln ECONOMIC SECTORS Jan. Feb. March TOTAL Share % Exports 1) Financial and insurance activ ities Agriculture, f orestry and f ishing Mining and quarry ing Manuf acturing Electricity, gas, steam and air conditioning supply Water supply ; sewerage, waste management and remediation activ ities Construction Wholesale and retail trade; repair of motor v ehicles and motorcy cles Transportation and storage Accommodation and f ood serv ice activ ities Inf ormation and communication Real estate activ ities Prof essional, scientif ic and technical activ ities Administrativ e and support serv ice activ ities of which Renting and leasing of motor v ehicles Education Human health and social work activ ities Arts, entertainment and recreation Other serv ice activ ities Others Source: National Bank of Serbia. Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % 2, Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % 0.10 Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ Rep. int Disb. 0% Rep. princ. Rep. int. Disb. 0% Rep. princ Rep. int Disb. 0% 0.17 Rep. princ Rep. int Disb % Rep. princ Rep. int Disb % Rep. princ. Rep. int. 1) Serbia's exports in the period January -March totalled EUR 2,265.4 mln. TOTAL Disb % 2, Rep. princ Rep. int Data on exports by economic activ ity in the period January March do not include EUR 0.2 mln f or unclassif ied categories. PRELIMINARY DATA 12