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Finance Ministry borrows 600 million lei for 6 months, 0.71% interest rate

The Finance Ministry borrowed on Thursday 600 million lei by selling treasury bonds due September 18, 2017, with an annual average interest rate of 0,71%, data published by the National Bank of Romania (BNR) show.

The 8 banks participating in the tender offered 1.4 billion lei, two times more than the initial value of the tender.

Treasury bonds do not carry interest rate, the profit being calculated ad difference between sales price, lower than the nominal value and the value the state will pay, which is the nominal value.

At the Thursday tender, the average profit was 0.71% per year and the maximum one - 0,73%, over the level of the last tender.

On February 13, the Finance Ministry place treasury bonds for 6 months, at an average annual profit of 0.56%.

In a single month, the cost of a 6 months loan grew by 27% for the Romanian state.

Treasury bonds are short term loans for one year.

The Thursday tender comes after two failures for benchmarket bonds, for which the Finance Ministry rejected all bank offers, because of high interest rates.

The Finance Ministry intends to borrow 3.7 billion lei from the domestic market in March 2017, to which it might add additional tenders for 375 million lei.

1.2 billion lei from treasury bonds and 2.5 billion lei from bond issues.

In March, the Finance Ministry programmed a bond tender in euros for 200 million euros.

For February 2017 the ministry had announced loans of 3.4 billion lei, but borrowed only 3.3 billion lei.

In 2017, the state financing needs is growing, as the government provided a budget deficit of 2.99% of GDP, compared to 2.14% of GDP reached in 2016.

The European Commission and many analysts expect a budget deficit of over 3% of GDP in 2017, because of the government’s overestimated budget incomes and GDP value.