Annual Bulletin 2016 on Public Debt

Transcription

1 Republika e Kosovës Republika Kosova Republic of Kosovo Qeveria Vlada Government Ministria e Financave - Ministarstvo za Finansija - Ministry of Finance Thesari i Kosovës Trezor Kosova - Treasury of Kosova Annual Bulletin 2016 on Public Debt Debt Management Division June 2017

2 2 The content Acronyms... 3 INTRODUCTION GENERAL DEBT Total Debt Stock Total Debt Service Debt Prepayment INTERNATIONAL DEBT Withdrawals from the international loans International Debt Service International debt portfolio by the type of currency International debt portfolio by the type of interest DOMESTIC DEBT Domestic Debt Service Domestic debt by instruments Average interest rates Holders of Securities GUARANTEES Annex 1. Loan Status

3 3 Acronyms International Development Association KSA Kosovo Statistics Agency WB World Bank EBRD European Bank for Reconstruction and Development EIB European Investment Bank IBD Islamic Bank for Development IBRD International Bank for Reconstruction and Development GDP Gross Domestic Production BRK Budget of the Republic of Kosovo DIN Islamic Dinar IMF International Monetary Fund DIFK Deposit Insurance Fund of Kosovo OFID OPEC Fund for International Development SFD Saudi Fund for Development EC European Commission KfW German Agency for Reconstruction CLC Consolidated Loan C SAR Saudi Riyal SDR Special Drawing Rights USA United States of America UniCredit UniCredit Bank Austria BRK Budget of the Republic of Kosovo 3

4 4 INTRODUCTION Based on the Public Debt Law no. 03 / L-175, GORK Regulation no. 22/2013 on Procedures for Issuing and Management of State Debt, State Guarantees and Municipal Debt, in order to increase transparency on State Debt data, Kosovo Treasury publishes the second Bulletins with the Data on General State Debt covering the period from the establishment of the state debt portfolio in 2009 to the end of the fiscal year Under the Law on Public Debt, "Total Debt is defined as the totality of the State and Municipal Debt. State debt is the debt that is taken on behalf of the Central Governmental Institutions which the Republic of Kosovo is obliged to repay, but does not include any obligation of other certain government entities, including but not limited to Municipalities, public enterprises, or Central Bank of Kosovo. Furthermore, the State Debt is divided into domestic debt and international debt. "Domestic debt is defined as the State debt subject to the laws of the Republic of Kosovo whereas the International Debt as the State Debt which is subject to agreement with foreign governments, government agencies, international financial organizations or other organizations and foreign companies on the basis of international agreements, treaties, conventions or other similar agreements subject to the laws of a legal jurisdiction other than of the Republic of Kosovo. State debt portfolio up until the end of 2016 is composed of the State Domestic Debt and International Debt, and two State Guarantees. So far, Kosovo has no Municipal Debt or Municipal Guarantees issued. The Bulletin also discloses historical data since the establishment of the State Debt portfolio. Bulletins is composed of four parts, in the first part are presented data on the General Debt, in the second part are the data on international debt, the third part data on domestic debt and in the last part are presented data on State Guarantees. 1.0 GENERAL DEBT 4

5 5 1.1 Total Debt Stock State Debt Portfolio of Kosovo was established in At that time, the portfolio was comprised of only one loan called C Consolidated Loan from the World Bank. The total amount of this loan was million euros. The CCL loan is inherited from the former Yugoslavia as part of the State Debt of Kosovo. This loan was inherited with three tranches / parts in roughly equal amounts as presented in Table 1. Table 1. Details of CLC credit (at the time of inheritance , amounts are in million Euro) Tranche Outstandi ng Debt Interest rate before 0.25% interest rate waiver** Type of interest LIBOR * This tranche is fully prepaid. ** Interest waiver is determined annually by the Bank's Board of Executive Directors. *** LIBOR rate is determined every six months on loan payment dates (March 15 and September 15), but since March 2013 the rate is fixed at 3.13% WB Fee Interest rate after 0.25% interest rate waiver % Variable*** 1.80% 0.55% 2.10% 2* % Variable 1.80% 0.55% 2.10% % Fix % This was the first loan of Kosovo state, to proceed in the coming years with new loans borrowed from various creditors. New loans were aimed at financing projects in education, agriculture, cadastre, energy, health, water, district heating, banking system, roads and railways rehabilitations, as well as budget support. In Annex 1 are disclosed all projects that are financed through state borrowings. However, since 2012 the issuance of Securities of the Republic of Kosovo begun to contribute to the total debt growth. As seen in Figure 1, Total debt has had mainly an incremental trend in nominal values, where for 2010 the debt has increased largely as a result of new withdrawals from loans - Disclosure of withdrawals for projects is presented in Annex 2. In 2011 total debt has decreased compared to the previous year, since in this year the state debt amortization has been higher than the withdrawals from contracted loans. In 2012, the general debt has increased markedly, for two reasons: the first, the receipt of three tranches from the Program with the IMF for nearly 93.6 million, this program achieved during 2012 and the second, the beginning of the issuance of Securities in the amount of 73.3 million Euros. While, in 2013 and 2014 Total debt has upward trend mainly as a result of issuance of Securities of the Republic of Kosovo. At the end of 2014, Total Debt marks the amount of million and compared to the nominal amount of the previous year has increased for 22%, and this also largely due to new issuances of Securities in the amount of 104 million Euros. Also, during 2015 Total Debt increased by 28% compared to the previous year, thus recording the amount of million Euros. The increase is mainly due to new emissions of securities 5

6 Milion EUR (% of GDP) 6 in amount of EUR 121 million, and the receipt of first tranche of the new IMF program, received in 2015, amounting to EUR 36 million. Whereas, the debt at the end of 2016 marks the amount of EUR million, and if compared with the nominal amount of the previous year, it increased by 14%. This increase is mainly due to new emissions of Securities in the amount of Euro 101 million. Figure 1. Total Debt Stock ( ) % 14% 12% 10% 8% 6% 4% 2% 0% Total Debt Total Debt (% of GDP) Table 2. Total debt (amounts in million Euro) International debt Domestic Debt Total Debt State Guarantees Total Debt (% of GDP)* GDP 4,070 4,402 4,815 5,059 5,327 5,567 5,807 5,985 * Calculation of indicators includes guarantees. Note: International debt changes over the years as a result of exchange rate fluctuations. Indicator Debt to GDP differs from the previous Bulletin, the GDP values for this Bulletin will be taken from the website of the Kosovo Agency of Statistics. 1.2 Total Debt Service The Republic of Kosovo consistently settles the debt in its fullness and in timely manner and handles claims for payment with high efficiency in conformity with financial agreements in 6

7 7 force and legal basis on debt service. All payments are processed by Budget of the Republic of Kosovo respectively the Treasury/DMD (Debt Management Division). Furthermore, during 2010 and 2011, the debt service of the Republic of Kosovo has been assisted by the US and Swiss state. US assisted in payment of instalments in the amount of Euro 17.9 million and the Government of Switzerland in the amount of 0.5 million Euro. Table 3 below presents the State Debt service over the years, divided into principal and interest. Table 3. Total Debt Service Debt Service Principal Repayment Interest Payment Debt service / Total Revenues (%) Note: The item of interest also includes payments other fees. The Debt Service indicator relative to Total Revenue differs from the previous Bulletin because we have used the data from another source, and here the total revenues are taken from the Reporting Division - Treasury. 1.3 Debt Prepayment In 2009 the Government of Kosovo has prepaid the second tranche of the CLC in the amount of million euros. In this case the amount of million euros was paid by the BRK, while the rest by US and the EC, namely the United States contributed with the amount of 125 million USD or converted in Euro million, and EC with 5 million Euros. Table 4. Data for the credit tranche payment of the CLC in 2009 Years 2009 The total prepaid amount BRK Donors USA European Commission

8 8 2.0 INTERNATIONAL DEBT During 2016 the International debt has not changed substantially compared with the previous year, this is because over the year except that there was a return of the international debt there has been withdrawals from the loans. In late 2016 International Debt marked the amount million euro, which represents 44% of total State Debt or 6.25% of GDP. Most of or 45% of the debt is owed to the IBRD, while another significant portion or 30 % is owed to the IMF. Table 5. International Debt over the years by creditors Creditor IBRD IMF UniCredit KfW Total Note: the International debt changes over the years as a result of exchange rate fluctuations. Debt in foreign currency is converted with the exchange rates at the end of the period. 2.1 Withdrawals from the international loans During 2016, is done the withdrawal of the second tranche from the IMF Program reached in 2015, also the Budget Organizations which fund projects from the International Debt have continued to withdraw funds from loans. Moreover, also the public companies have continued to withdraw funds from on-lent loans from the Ministry of Finance, as can be seen in Annex 2. Below are the withdrawals of credit funds over the years. Table 6. Withdrawals by Creditor Creditor IMF UniCredit KfW Total Note: the International debt changes over the years as a result of exchange rate fluctuations. For withdrawals from the loans that are in foreign currency, the exchange rate on the day of the transaction is used. 2.2 International Debt Service During 2016 for the International Debt service were paid the amount of million Euros which represents 4.73% of budget revenues. From the Annex 3 we can see that about 66% of 8

9 9 the paid amount is to IMF, whereas 24% is debt service to the IBRD and 10% to other creditors. In Table 7 below is presented debt service divided for principal, interest and other fees. Table 7. The International Debt Service over the years International Debt Service Government Repayment Interest Other fees On-lending Repayment Interest Other fees Debt service / Total revenues (%) Note: Other fees are paid by budget appropriation for interest payments. The Debt Service indicator relative to Total Revenue differs from the previous Bulletin because we have used the data from another source, and here the total revenues are taken from the Reporting Division - Treasury. 2.3 International debt portfolio by the type of currency International debt portfolio is currently composed of two currencies, Euro and SDR 1. The Government of Kosovo has contracted and ratified loans in the currencies of USD, DIN and SAR, but withdrawals of the respective loans have yet not started, as can be seen in Annex 1. 1 The SDR is a pool of currencies which consists of the following currencies: EUR, USD, GBP, and JPY. The value of SDR is determined based on an average which is drawn from the values of the above mentioned 9

10 10 In late 2016, about 28% or million Euros of international debt portfolio is debt in SDR currency, mostly borrowed from the IMF and, while the remaining approximately 72 % is borrowed in Euro currency from other creditors. Table 8. The stock of debt in foreign currency Creditor IMF Total International debt portfolio by the type of interest Part of the debt portfolio which has the variable rate is composed of debt to the IMF. Hence at the end of 2016, about 30.5 % of International debt portfolio is exposed to variable interest rate. Table 9. The amount exposed to variable interest Interest Fix Variable Total DOMESTIC DEBT The Republic of Kosovo has started the issuance of its Securities since January Market development has proved to be fairly successful in terms of investor's interest and borrowing costs where this type of borrowing has contributed as the main catalytic for financing the budget deficit. In 2016 Domestic Debt marked million Euros which represents 56% of total State debt or 8 % of the GDP. Since the domestic debt portfolio was established in 2012 and the base is currencies. A review of the SDR basket is conducted every five years by the IMF-s Executive Board. As its November 2015 review, the Board decided to include the Chinese renminbi in the SDR basket as a fifth currency, effective 1 October It is the net exposure value, which implies the amount of exposure excluding the Euro component. With the inclusion of the Chinese renminbi on October 1, 2016, the formula has changed and now the turnout in the new "basket" of the euro is percent. 10

11 11 relatively low, the relative increase from year to year appears to be quite high - 108% in 2013 and 68% in 2014, 47% in 2015, and 27% in Table 10. Domestic Debt Domestic Debt (net) Debt Stock New Issuances Note: Issuances and stock are reflected in the net value 3.1 Domestic Debt Service Since the Republic of Kosovo operates in budget deficit in which case through the Medium Term Expenditure Framework (MTEF) it is not foreseen the amortization of domestic debt from regular budget revenues, the Treasury/MoF except that conducts auctions for raising new funds from Securities Issuances, it also conducts auctions for re-financing instruments which mature. As a result, in the following are shown interest payments on Securities since the establishment of the market in Also, in table 12 is disclosed interest payment for maturity, which has been paid during Table 11. Domestic Debt Service Domestic Debt Interest Payment Payments of principal Interest/Total revenues (%) Table 12. Interest payments by maturities Instrumenti Months Months Months Years Years Years 1.00 Total Domestic debt by instruments In the first year of the market establishment were issued Securities with short term maturities, mainly 3 and 6 months, whereas in the following years the emitting strategy has contributed to the gradual extension of maturities. Thus, in 2013 instruments with maturities of 12 months were issued, to continue in 2014 with the issued of instruments with a maturity of 2 years and further with maturities of three and five years in During 2016 the Treasury / MoF was focused on the issue of new instruments with maturities of 2, 3 and 5 years. Table 12 also shows the dynamics of instruments issued by maturity over the years. 11

12 12 Table 13. Domestic Debt by instruments (nominal value) Instrument Months Months Months Years Years Years Total Average interest rates Below is presented the average interest rate per instrument and the interest rates curve for each instrument issued over the years. Table 14. The average interest rate per instrument Instrument Months 2.52% 0.57% 0.56% 0.63% 0.21% 6 Months 2.71% 1.27% 1.34% 1.64% 0.25% 12 Months % 1.72% 1.57% 0.48% 2 Years % 2.79% 0.83% 3 Years % 1.63% 5 Years % 2.49% Figure 2. The curve of interest rates over the years per instrument 12

13 % 5.00% 4.00% 3.00% 2.00% 1.00% % T-Bill 3 months T-Bill 6 months T-Bill 12 months Bond 2 years Bond 3 years Bond 5 years 3.4 Holders of Securities According to regulation No.MF-CBK 01/2014 for the Primary and Secondary Market of Government Securities of the Republic of Kosovo, in addition to Primary Stakeholder and Primary Participants also other natural persons and legal entities are eligible to purchase securities in the Primary and Secondary market of the Government Securities. As a result, in addition to banks as well as the Pension Trust as a Primary Participant, Securities are held by other physical and legal investors (private businesses and individuals). Below we have presented in the table the status of Securities Holders for 2015 and Table 15. Holders of Securities (nominal value) Securities Holders 2015 % 2016 % Commercial Banks % Pension Funds % Public Institutions % Insurance Companies % Others % Total % % Tenor 4.0 GUARANTEES During 2014 the Republic of Kosovo issued the first guarantee in the amount of 10 million Euros, which guarantees DIFK for the credit line provided by the EBRD. This credit line has served that DIFK increase the value of insured deposits from 2,000 to 3,000 euros per depositor. 13

14 14 Whereas, the second international guarantee, issued by Kosovo in 2016, guarantees the local Public Enterprise Urban Traffic for the loan offered by the EBRD at a value of 10 million Euros. It is worth mentioning that this loan is guaranteed within Kosovo institutions originally from Pristina Municipal Assembly. This loan is intended to advance the Urban Traffic in Pristina, where among other things, the purchase of 51 new buses, which will operate in six lines in the capital. Table 16. Guarantees State Guarantees EBRD The Guarantee for Credit Line of DIFK Guarantee for Urban Traffic Pristina State Guarantee (% of GDP) 0.18% 0.17% 0.33% 14

15 Annex 1. Loan Status Creditor Loan Loan amount in original currency Amount in EUR Withdrawals Committed Undisbursed Direct Loans IBRD Consolidated Loan C Public Sector Modernization Project Real Estate Register and Cadastre Project IMF Stand-By Arrangement First Sustainable Employment Development Policy Operation Agriculture and Rural Development Project Financial Sector Strengthening and Market Infrastructure Project I IMF Stand-By Arrangement Energy Sector Clean-Up and Land Reclamation Project UniCredit Modernisation of the Kosovar Education System through e-education IsDB Financing the Upgrading of the Milloshevë-Mitrovicë M2 Road Project OFID Upgrading of the Milloshevë-Mitrovica M2 Road Project SFD High Speed Road Prishtina-Mitrovice Project Health Project Energy Efficiency and Renewable Energy Project IMF Stand-By Arrangement Kosovo Education System Improvement Project Modernisation of the invasive cardiology services at the University Clinical UniCredit Center of Kosovo EBRD Kosovo Regional Roads EIB Route 10 Rail Rehabilition On-Lending Loans KfW Water Supply and Wastewater Disposal, Phase II KfW Improvement of Central Heating Systems KfW Municipal Water Supply and Wastewater Disposal in Pristina, Phase III KfW 400 kv Transmission Line AL-KS KfW Improvement of Transmission Network Financial Sector Strengthening and Market Infrastructure Project II

16 16 EBRD Kosovo Railway Route 10 Rehabilitation Project Energy Efficency Measures in Public Buildings at the Municipality Level in KfW Kosovo Note: Withdrawals from the SDR currency loans are converted into the EUR currency at the spot rate of withdrawals, while for other non-withdrawn loans which are in the SDR currency, USD, SAR and DIN, the exchange rate on 30/12/2016 is used (1SDR=1.2753Euro, 1USD=0.9474Euro, 1SAR=0.2525Euro, 1DIN=1.2753Euro). 16

17 17 Annex 2. Loans Withdrawals over the years Creditor Project Direct Loans IBRD Consolidated Loan C Withdrawals Public Sector Modernization Project Withdrawals Real Estate Register and Cadastre Project Withdrawals IMF Stand-By Arrangement 1 Withdrawals First Sustainable Employment Development Policy Operation Withdrawals Agriculture and Rural Development Project Withdrawals Financial Sector Strengthening and Market Infrastructure Project I Withdrawals IMF Stand-By Arrangement 2 Withdrawals Energy Sector Clean-Up and Land Reclamation Project Withdrawals Modernisation of the Kosovar Education System through e- UniCredit Education Withdrawals Health Project Withdrawals Energy Efficiency and Renewable Energy Project Withdrawals IMF Stand-By Arrangement 2015 Withdrawals Kosovo Education System Improvement Project Withdrawals Modernisation of the invasive cardiology services at the UniCredit University Clinical Center of Kosovo Withdrawals On-Lending Loans KfW Water Supply and Wastewater Disposal, Phase II Withdrawals KfW Improvement of Central Heating Systems Withdrawals Municipal Water Supply and Wastewater Disposal in Pristina, KfW Phase III Withdrawals KfW 400 kv Transmission Line AL-KS Withdrawals KfW Improvement of Transmission Network Withdrawals Financial Sector Strengthening and Market Infrastructure Project II Withdrawals

18 18 Annex 3. Debt Service over the years Creditor Loan IBRD Direct Loans Consolidated Loan C Public Sector Modernization Project Real Estate Cadastre and Registration Project IMF Stand-By Arrangement 1 First Sustainable Employment Development Policy Operation Agriculture and Rural Development Project Financial Sector Strengthening and Market Infrastructure Project I IMF Stand-By Arrangement 2 UniCredit Energy Sector Clean-Up and Land Reclamation Project Modernisation of the Kosovar Education System through e-education Principal Interest Other fees Interest Other fees Interest Other fees Principal Interest Other fees Interest Other fees Interest Other fees Interest Other fees Principal Interest Other fees Principal Interest Other fees Principal Interest

19 19 Health Project Energy Efficiency and Renewable Energy Project IMF Stand-By Arrangement 2015 UniCredit KfW KfW KfW KfW KfW Modernisation of the invasive cardiology services at the University Clinical Center of Kosovo On-Lending Loans Water Supply and Sewage Disposal Prishtina, Phase II Improvement of District Heating Systems Municipal Water and Sewage Disposal in Prishtina, Phase III 400 kv Transmission Line Albania- Kosovo Improvement of Transmission Network Financial Sector Strengthening and Market Infrastructure Project II Other fees Interest Other fees Interest Other fees Interest Other fees Interest Other fees Interest Other fees Principal Interest Other fees Principal Interest Other fees Principal Interest Other fees Interest Other fees Interest Other fees

20 20 KfW Energy Efficency Measures in Public Buildings at the Municipality Level in Kosovo Interest Other fees