Liquidity buffer costs 200 million euros per year. And it is worthwhile

  • ECO News
  • 6 June 2017

In order to maintain the dimension of the current liquidity buffer, the Platform for Sustainable Growth estimates its yearly cost is around 200 million euros. But it is worthwhile, they assure.

It costs around 200 million euros per year, but it is an insurance that is worth paying for: it is the Portuguese Treasury liquidity buffer. The advice and the math is given by Ricardo Santos, one of the authors of the study “What paths for the Portuguese public debt?”, presented by the Platform for Sustainable Growth (PCSPlataforma para o Crescimento Sustentável).

The think tank, created in 2011 after Portugal requested an international bailout, presents an x-ray of the Portuguese public debt and points to a possible path for its management. Although it suggests many ideas up for debate with the European partners, the think tank advocates for a dynamic management, going to the market to smooth the maturity of reimbursements (broadening them) and, therefore, soften the risks of managing a portfolio of around 240 billion euros.

One of the measures perceived as key in decreasing these risks is precisely to maintain the liquidity buffer in its current size, between six and eight billion euros. Ricardo Santos did the math and estimated that the cost of this strategy is “around 200 million euros per year”.

Investigators assure it is important to have this buffer as means to react to any external shocks and difficulties in accessing the markets. The path will therefore be to maintain the discipline of Public Finance and to promote economic growth.