At the same time, in four of the first five months of the year, government paper of more than 4 billion lei (almost EUR1 billion) will fall due each month. May will see both government paper worth over RON4 billion and EUR700 million in eurobonds mature.
In all, leu-denominated government paper reaching maturity in 2012 amounts to about EUR9.3 billion. Refinancing of notes falling due stands at RON52.4 billion (EUR12.1 billion).
However, many analysts do not expect the Finance Ministry to have any trouble raising the funds it needs to refinance maturing debt, as well as the budget deficit.
They also expect the central bank (BNR) to continue its cash injections that have become the norm over the past few months.
Bond issues on foreign markets
On the other hand, some foreign analysts said Romania might have to borrow money from the IMF and the EU, should it be unable to get it from the intentional market.
The 2012 schedule announced by the Finance Ministry shows plans to raise an indicative amount of EUR2.5 billion from the international market via a global medium term note program, which now allows selling government paper both in Europe and in the US. Borrowing costs could be higher than in 2011, though.
The Finance Ministry’s domestic borrowing program starts on Thursday, January 5. This month’s target was set at RON4.5 billion, the same as raised in December.
With all the talk about the necessity to extend the average maturity of its bonds, the Finance Ministry promises a 15-year issue this year largely intended as an investment instrument for pension funds, which really need longer term investment options.
It remains to be seen whether buyers and sellers see eye to eye on the price. The Romanian market really needs longer term price references, which influence lending in lei.
Non-residents dropped RON1.3 billion worth of government paper in two months
Worsening euro zone debt crisis not only prevented Romania from borrowing from the international market but also caused foreign investors to sell a significant amount of Romanian notes.
After an increase in the investments in Romanian government paper by foreign investors especially at the end of 2010 and in the first half of 2011, the trend suddenly reversed last fall.
The consolidation of the macroeconomic indicators, the continuation of the agreement with the IMF and EU and the recession exit prospects had convinced non-residents to buy up to 20% of the total portfolio of leu-denominated paper issued by the Finance Ministry.
Only that the foreign market turmoil made many sell, even though Romania got its investment grade rating back from rating agency Fitch and has been constantly getting positive reviews from the IMF.
Whereas non-residents had over RON11.5 billion in government paper at the end of August 2011, by the end of October their holdings had gone down by RON1.3 billion to RON10.2 billion.
Under the circumstances, foreign investors now hold 15.7% of the total notes issued by the Finance Ministry.
Although clearly showing a decline in non-residents’ appetite to finance Romania, as seen by the failed attempt at issuing bonds for the US market, the mere EUR2.4 billion that foreigners still hold also means a lower vulnerability to a shocking scenario when those investors might decide to sell all their Romanian bonds at once. (EUR1=RON4.3219)
(English version by Loredana Fratila-Cristescu)