Gov’t plans to raise up to 500 mln in new Eurobond

Finance Minister Shkelqim Cani says government is planning to borrow Euro 300 million to 500 million from international markets so that lending to businesses from local banks is not affected.
TIRANA, Nov. 18 – With the 2015 budget and fiscal package already approved, the Albanian government has started working on issuing a second Eurobond in 2015 when its debut five-year Eurobond issued in late 2010 matures.
Finance Minister Shkelqim Cani says government is planning to borrow Euro 300 million to 500 million from international markets so that lending to businesses from local banks is not affected.
After overcoming a 12-month moderate decline only last July, lending to the economy slowed down to 1.6 percent in September 2014 despite interest rates on both lek and euro denominated loans standing at historic low.
“The new Eurobond is estimated to have a maturity of 5 to 10 years, denominated in US dollar or Euro, but we will follow the markets in order to decide. The amount could be from Euro 300 million to 500 million in order not to affect the debt ceiling but to replace one debt with another one,” said Cani.
In its 2015 budget, the Albanian government expected expects economic growth to gradually recover to 3 percent in 2015 and accelerate to 4 percent in 2016 and 4.5 percent in 2017. The budget deficit is expected to drop to 4 percent of the GDP, down from 6.6 percent in 2014 while public debt will for the first time in the past global crisis years slightly drop to 70.6 percent down from 71 percent of the GDP.
In its new rating, Standard & Poor’s, one of the world’s leading rating agencies revised Albania’s outlook on long-term sovereign credit rating to positive from stable affirming its ‘B/B’ ratings, which is expected to have a positive impact on Albania’s external borrowing and the Eurobond interest rates.
“We think Albania will make noticeable progress on its fiscal consolidation path in 2014-2016 and begin to reduce debt relative to GDP. The program agreed between the government and the International Monetary Fund in early 2014 provides a policy anchor for the government’s reform
agenda and continues to support the sustainability of Albania’s high net general government debt of 66 percent of GDP in 2014,” said Standard & Poor’s which along with Moody’s are the only top agencies rating Albania.
In late 2010, Albania issued its first-ever Eurobond of 300 million euros with a maturity of up to five years and an interest rate of 7.5 percent. The money was mainly be used to pay off a costly syndicate loan taken last year to fund the costly Durres- Kukes highway linking Albania to Kosovo.
The debut Eurobond issue in November 2010 came as international financial markets stabilized and after some changes were approved in Parliament to the government deal with Deutsche Bank AG and JPMorgan Chase & Co. which managed the Eurobond sale. The deal had been put off several times after the Greek debt crisis rattled markets.