Serbia Sees No Urgent Eurobond Need as Budget Performing Well

  • Finance Minister says ready for foreign bond whenever needed
  • Premieer Vucic sees no need to borrow abroad for now

Serbia is prepared to sell foreign bonds as soon as it needs such funding, without being under pressure to tap international markets as budget developments have been favorable, ministers said on Monday.

The biggest former Yugoslav republic is in contact with investors, both in Europe and the U.S., in case it decides to sell the first bond abroad in three years, Finance Minister Dusan Vujovic said in an interview. The government is keeping all options open, including the potential size and the timing of a foreign debt sale, he said.

“We have prepared the ground to issue Eurobonds whenever we decide the time is right,” Vujovic said on the sidelines of a conference organized by the European Bank for Reconstruction and Development in London. “But this will depend on the premium that we have to pay, the developments in financial markets, our own external liquidity, this will depend effectively on the dynamics in Serbia.”

The Balkan nation is gearing up for early elections, which will be probably held before the end of April. Prime Minister Aleksandar Vucic initiated the ballot two years before his term was due to end as he seeks four full years to carry out unpopular reforms and prepare the country for European Union membership by 2020.

Various Options

The economic overhaul includes selling state assets and closing down unprofitable companies that require hundreds of millions of dollars in state support every year. The cost-cutting measures were outlined in a stand-by loan agreement with the International Monetary Fund.

“We will see the situation regarding our fiscal deficit, it has gone well so far,” Vucic said in a separate interview at the EBRD conference. “There’s no need” to sell a Eurobond for now, he said.

The yield on Serbia’s dollar bond maturing in 2021 was little changed at 4.732 percent at 3:08 p.m. in Belgrade, according to data compiled by Bloomberg. The dinar traded around 0.1 percent weaker at 123.27 per euro.

The government is considering various options if it decides to issue foreign bonds, including selling “multiple small amounts of up to two billion euros,” Vujovic said.

The country hasn’t decided yet whether it would borrow in euros or dollars, and would still have to pick banks to manage a potential sale, according to the finance minister. Vujovic also wants to expand borrowing in the domestic market to approach more retail investors.

In an effort to address one of the main hurdles for economic growth, the Finance Ministry is working on the legal framework allowing banks to start selling non-performing loans, which totaled 425 billion dinars ($3.8 billion) at the end of September, Vujovic said.

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