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NEWS

19. 5. 2017

General government debt in Slovenia has been diminishing at faster pace than it is provisioned by the Stability and Growth Pact Debt Rule

Ljubljana, 19th of May 2017 – Slovenia has with the latest debt issuance transaction concluded longterm funding programme for the fiscal year 2017. It has proved to be in the front line with all those most successful countries in reference to debt reduction path and advanced debt management. In this instance the debt refinancing risk has been significantly reduced which enables Slovenia a managable and timely financing of the central government budget in years to come.

Slovenia has yet finalized long-term funding programme for the fiscal year 2017 and will in the rest of the year focus only to short-term financing in line with adopted T-bills programme. For 2017 the general governemnt debt is estimated at about 77% of GDP which is lower than Stability and Growth Pact Debt rule would suggest.

 

Active cross-currency debt management of buying back multiple dollar issues, dealing with the early termination of all the cross-currency swaps on the back of it, and reissuing on the euro market lead to a significant state budget interest bill reduction, contained debt increase and has overall positive budgetary effect, measured in net present value terms. The interest bill in 2017 now stands at about EUR 960m, i. e. 2.31%, which is significantly lower to EUR 1,064m, i.e. 2.7% in 2016. This reflects the one year reduction worth of EUR 104m, and further of EUR 90m to the level of EUR 870m envisaged in year 2018 (1.99% GDP). On 25th January 2017 the Treasury Directorate of the Ministry of Finance of the Republic of Slovenia was awarded a title of the Sovereign Risk Manager of the Year by Risk Awards. The awarded title recognized the effort of the state treasury in pursuing active cross-currency debt management that left a significant positive budgetary effect.

 

Slovenia has so far with all five cross-currency liability management transactions bought back a 47% of the existing US dollar debt portfolio so that the denominated US$ debt in state budget structure now represents only 12.5%. The rest of it is denominated in domestic currency euro. This is how Slovenia on macro level limits the exposure to potential US dollar, although fully hedged, and euro financial and debt capital markets shocks or greater disparities. The state budged risk profile has been enhanced so that average weighted time to maturity increased to 9.2 years, being 5.7 years in 2013, and modified duration incresed to 7.8, being 4.5 years in 2013. This enables Slovenia with a managable and timely financing of the central government budget in years to come.

 

Active debt management has not been overlooked by rating agencies. Quite contrary. Moody's, which rates Slovenia for three notches below to S&P and Fitch, issued a report in May stating: »Slovenia’s Launch of Debt Buyback Is Credit Positive«. Moody's report.

 

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