Serbia Seeks Eurobond Sale With or Without New IMF DealAlan Crosby, Zoltan Simon and Gordana Filipovic
Serbia is seeking to sell foreign-currency bonds as soon as next month regardless of whether it agrees to a new deal with the International Monetary Fund beforehand, Finance Minister Mladjan Dinkic said.
The Balkan country last sold $750 million in five-year notes two-months ago. Yields on the bonds fell eight basis points, or 0.08 percentage point, 3.94 percent at 10:16 a.m. in Belgrade, from as high as 5.1 percent Nov. 16, according to data compiled by Bloomberg. The government plans to raise $2 billion from Eurobond sales and $1 billion from Russian loans this year to help finance debt, Dinkic said in Vienna yesterday.
Junk-rated Serbia is following Hungary, which this week moved closer to selling foreign-currency bonds for the first time in 20 months, even as its IMF talks remained deadlocked. Bond buying by central banks in the U.S. and the euro region has stoked appetite for riskier assets in past months, driving down borrowing costs for emerging markets.
The debt sale and the IMF deal are “different issues” and “the government is ready to go with the bond regardless,” Dinkic said in an interview. Serbia will sell foreign notes “soon, maybe as early as next month. Demand is high right now and the market conditions are right. We are ready to move quickly,” he said.
Serbia is seeking a new IMF loan deal to shore up confidence that government policies will bolster macroeconomic stability after the fiscal deficit hit a record 7.2 percent of gross domestic product in June. The government has repeatedly said it won’t seek IMF cash, only a stand-by loan program.
“We will talk with the IMF about a precautionary arrangement, without borrowing, because we can finance ourselves from the market,” Dinkic said while attending the Euromoney conference in the Austrian capital yesterday.
Serbia will need 493.6 billion dinars ($5.9 billion) this year to service its debt, 25 percent more than in 2012. The government said it will rely on dinar- and euro-denominated debt sales at home and dollar-denominated Eurobonds until Standard & Poor’s and Fitch Ratings upgrade Serbia’s BB- credit rating, the third-highest non-investment grade.
“Financing externally is so cheap at the moment that any sovereign worth its salt or rating probably should be coming to market to get some cash in the bank, and the earlier and cheaper the better,” Tim Ash, chief emerging-markets strategist at Standard Bank Group Ltd. in London, said by e-mail yesterday. “The problem is that the IMF has little or no leverage.”
An IMF mission will probably come to Serbia “in the next few weeks,” Bogdan Lissovolik, the resident representative for the Washington-based lender, said in Belgrade yesterday. The mission has yet to look at budget performance in 2012 and for 2013. The government aims to narrow the fiscal gap to 3.6 percent of GDP this year, from an estimated 6.7 percent in 2012.
Serbia is becoming a “worrying exception” in the region, according to Lissovolik, because of its ballooning public debt, which doubled to 17.5 billion euros ($23.4 billion) on Nov. 30 from 8.7 billion euros in 2008, Finance Ministry data show.
Serbia will seek a loan from Russia’s government in the second quarter and is in talks with VTB Bank OJSC, Russian’s second-largest lender, about selling ruble bonds worth $250 million, Finance Minister Dinkic said yesterday.
The government is also interested in loans from China, Turkey and the United Arab Emirates, countries where economic growth is faster than in the European Union, Dinkic’s press office cited him as saying after a meeting with the European Bank for Reconstruction and Development yesterday.