The Finance Ministry plans to issue a bond aiming to tap over €1 billion from markets to cover this year’s financing needs as early as next week, informed sources told INSIDER.
Road shows have already begun so that the new bond’s underwriters along with officers of the Public Debt Management Office (PDMO) get a chance to assess potential investors.
Given the over-concentration of loan maturities by the end of 2031, the Finance Ministry wants to issue a bond exceeding a 12-year term. That is precisely why involved officials are visiting major European capitals such as London, Paris and Frankfurt to determine the market. The big challenge for the Ministry is whether it can achieve a bond issue over 12 years at an affordable borrowing cost, something that Cyprus has never done before.
The cost of borrowing for the Cyprus government was 2.3% in 2018, with assessments indicating that for a 10-year bond the cost is expected to be around the same level or slightly below. But if the Ministry does decide to opt for a version with a maturity of more than 12 years, it is likely that the cost of borrowing will rise above 2.3%. This is where the Public Debt Management Office focuses upon in their current hunt for potential investors before concluding the terms.
PDMO presentations point out that the state has overall financing needs of €1.6 billion in 2019, while state liquidity can cover loan maturities for the first nine months of the year. Provided, of course, that forecasted significant primary surpluses are met.
Cyprus’ debt rose to €21.3 billion by the end of 2018.