Serbia’s new debt on the international capital market in the amount of 1.75 billion euros for solving environmental problems and repaying old debts is not a cheap loan and carries a risk because it implies an increase in exports in order to return that money, financial analysts said today.
“Borrowing abroad in foreign currency is risky because exports must be significantly increased in order to return that money, so it is more rational, if necessary, to borrow on the domestic capital market,” foreign investment consultant Milan Kovacevic told Beta.
Yesterday, Serbia sold a “green” bond worth one billion euros on the international capital market, with a term of seven years, a coupon rate of one percent and a yield rate of 1.26 percent.
According to Finance Minister Sinisa Mali, the money will be used to finance and refinance costs related to the construction of drinking water treatment plants, wastewater, the construction of subways and modern railways, flood protection, biodiversity conservation, control and prevention. pollution, waste collection, processing and recycling, energy efficiency and renewable energy sources.
At the same time, a conventional Eurobond of 750 million euros was issued, with a maturity of 15 years, a coupon rate of 2.05 percent and a yield of 2.3 percent, and that money will be used to repay old debts from 2011 at an interest rate of 7.5 percent.
Kovacevic said that indebtedness in the country can be more easily kept under control in a situation when it is known that the budget deficit will be high.
He added that the expansive increase in exports will be difficult because it is known that foreign trade with China is around three billion euros, and that exports are “almost non.existent”, and exports to Russia are lower than imports.
He assessed that the reason why the bond is issued with the sign “green” is to calm down the upset public who took to the streets due to environmental problems.
Financial analyst Branislav Jorgić said that the loan of 750 million euros is understandable and will not have an effect on the growth of public debt because the old debt is returned with that money, and that the debt is irrational for solving environmental problems because environmental problems need to be repaired by polluters.
“Borrowing one billion euros is a great burden for the budget, especially since the invested funds do not provide the possibility for the investment to pay for itself in a short period of time, but the burden will fall on taxpayers,” said Jorgić.
He pointed out that the financial burden of one billion euros will be especially great if the growth of the gross domestic product (GDP) is not six or seven percent.
According to him, that debt is primarily disputable because the problems in ecology should be solved by polluters, not the state.
“Polluters are companies and citizens and they should bear the cost of pollution, and even the costs of energy efficiency should be borne by citizens and those who build, not the state,” Jorgic said.
He added that this debt for environmental pollution is especially dangerous if the money is wasted inappropriately.
Jorgic pointed out that the cost for the “green” bond of 1.26 percent is not “spectacularly low” as the Minister of Finance and the National Bank of Serbia represent it, because there is a lot of cheap money on the capital market.