Serbia issue two billion worth of bonds, finance ministry says

RETUERS/Antonio Bronic

The Serbian government has issued bonds worth two billion Euro at an interest rate which is much higher than the loans offered by the International Monetary Fund to countries facing problems because of the coronavirus pandemic.

The Finance Ministry said that Serbia has sold two billion Euro worth of state bonds which are being listed on the London Stock Exchange with a due date of 2027. A press release said that Serbia is the only country in Europe to have ventured out onto the international capital market during the COVID-19 pandemic without the assistance of the European Central Bank in placing the bonds. It added that more than 300 foreign investors, including what it said are “respectable funds, insurance companies and banks” have shown that there is demand for more than seven billion Euro. “The level of the Eurobond sales was two billion Euro with a coupon rate of 3.125 percent, a yield rate of 3.375 percent and a due date of seven years, despite the fact that the initial expectations of investors was that the bonds would be issued at a higher interest rate. However, the interest rate was significantly lowered because of high demand,” the press release said.

In a separate press release, Serbian National Bank (NBS) Governor Jorgovanka Tabakovic (an official of the ruling Serbian Progressive Party – SNS) said that the bond issue is more proof that international investors have full confidence in the Serbian economy. She also claimed that the interest rate on the bonds was lowered by half a percentage point because of high demand at the auction.

The portal recalled that the International Monetary Fund offered countries whose economies were facing problems during the coronavirus pandemic loans at interest rates of 1.29 and 2.1 percent depending on the size of the loan, adding that the Serbian authorities did not want to take the offer. said that the offer went even lower with Bosnia-Herzegovina getting 333 million Euro at an interest rate of 1.05 percent and a 39 month grace period.

The IMF offer of loans comes with the condition of control of how the money is spent which the bond issue does not include.  

The portal said that Serbia issued bonds worth a billion Euro at an interest rate of 1.62 percent and a due date of 10 yearrs in June 2019 and launched a re-issue of Eurobonds in November that year worth 550 million Euro at an interest rate of 1.25 percent.

The Serbian Fiscal Council said on April 6 that the country would need 6.5 billion Euro to deal with the fallout of the pandemic this year alone. Less than a week later, President Aleksandar Vucic said that Serbia would not take aid from the IMF since the country has huge hard currency reserves and 31 tons of gold. Three weeks later the President said that Serbia refused 1.2 billion from the IMF, saying that it should not get further into debt than it needs to.

The portal said that an unnamed group of Serbian citizens who learned beforehand of the latest bond issue sent letters to four investment banks warning them of the situation in Serbia and the risks. President Vucic commented that letter on Monday saying that, despite the letter warning of the political and economic crisis in Serbia, investors were not tricked.