Bogdan Dragoi: State Will Not Pay Over 10% Interest On Domestic Market

The Ministry of Finance will not accept yields in excess of 10 per cent p.a. on governmental securities issued this year, Secretary of State Bogdan Dragoi told the CEI Summit Economic Forum.

The statement came in the broader context that the domestic market remains the only source where the Ministry of Finance can still borrow from in order to finance the budget deficit this year, considering that foreign financing has become inaccessible as a result of ongoing political turbulence. As the scheduled tranches of foreign loans contracted from international financial institutions have been delayed, foreign markets seem unwilling to provide Romania with the needed liquidities, despite the Government"s initial plan to issue Eurobonds worth between 500 million EUR and 1.5 billion EUR.

Ministry of Finance Secretary of State Bogdan Dragoi in September had announced that Eurobonds would be issued in up to two months "to the extent that the market allows this operation."

As the foreign investors" confidence in Romania has deteriorated lately and rating agencies are keeping a close eye on the country, ready to downgrade it at any time, as market sources indicate, the Ministry of Finance has decided to postpone the Eurobond issue for next year, after the political situation will have been settled. "We will wait until the political situation calms down and then we will issue the bonds. That will most likely happen next year, but not necessarily in January," Bogdan Dragoi said.

The Ministry of Finance official was reluctant to say how the State was planning to secure financing for the time being. While stressing that such strategy could not be disclosed, he said that he intended to test the market next year for governmental securities maturing in more than 10 years, and had already started talks with pension funds, insurance companies and other potential investors.

Bogdan Dragoi did not discard the prospect of new forex-denominated governmental securities being issued on the domestic market, but pointed out that other options for financing the budget deficit would also be explored.

"We are trying to close the year with a deficit of 7.3 per cent. That is our target. For the time being, we are focusing on the domestic market, both lei and euro, but other options are also being discussed," Secretary of State Dragoi added.

The Ministry of Finance last week secured 793.8 million EUR from the domestic market through forex-denominated coupon bonds maturing in three years. The amount is equal to half of the third tranche of the IMF loan, which was originally planned for December to cover the budget deficit for 2009.

Tradus de Andrei Năstase