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Tuesday 16.01.2018 | Name days: Lida, Lidija
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Latvia plans to borrow at least EUR 350 million from international markets this year

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis year, Latvia will have to borrow at least EUR 350 million from international markets. This amount may also grow more, admits head of Latvia’s State Treasury Kaspars Abolins.

«The base scenario provides that we will have to attract EUR 1 billion from capital markets this year. Two-thirds of this amount has already been attracted, but EUR 350 million will have to be attracted before the end of the year. At the same time, I would like to say that this is the base scenario, because there are many variables that can still affect it. First of all, we can see that demand for State Treasury’s loans continues to increase – primarily from the side of municipalities,» says Abolins.

He says it will be necessary to attract additional resources to cover loans if demand continues to increase. «Secondly, we have always been active in the use of favourable market situations. If interest rates remain low, it may be possible for us to perform pre-financing of next year’s needs.»

Demand for loans increases in municipalities because the use of EU funds has become more active. Abolins mentions that March was a record month in this regard – ST and municipalities signed a total of 63 loan contracts worth nearly EUR 50 million.

Low interest rates remain on financial markets at the moment. In February, Latvia released ten and thirty-year euro bonds on international markets for a total amount of EUR 650 million.

«If we look at the yield of ten-year bonds, it is 1,062%. If we compare it with counties with a similar credit rating, Slovenia’s ten-year bond yield was 1.57%. Now Latvia’s bonds are significantly below this level. There are countries in which finances are attracted at lower rates. For example, Luxembourg, whose bond yield was 0.74%. But Luxembourg has a higher possible credit rating. With that, the difference is not that large. With Latvia’s credit rating steadily growing, we will be able to fixate rates on lower levels,» said Abolins.

As main factors that can influence lending this year, Abolins mentioned the upcoming parliamentary elections in France and Germany. «Those are political event, of course. There isn’t much that is associated with any unexpected results. It is more likely that investors have decided to pick a cautious approach. We have to wait until market fluctuations drop to the lowest point – it is then investors become the most active. We will try to adapt to investors’ mood,» says Abolins.

He did not wish to make predictions about attracting the necessary EUR 350 million this year. If this amount grows because of municipal loans or low interest rates, there could be a new release of bonds. If not, this money could be attracted by performing an additional release of some of Latvia’s existing bonds.

«We have multiple options. For example, if we need an additional amount of EUR 350 million this year, it would not be rational to form a new release of bonds of the same amount, because investors look at the total yield. Currently, we can add ten, twenty and thirty-year bonds. We can also combine them. The decision will be made once we see investors’ interest,» said Abolins.

Ref: 224.109.109.6091


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