Public debt is rising. The Government reinforces buffer to pay large reimbursement in June
Public debt is rising again, but the Government says there is no need to be alarmed. The Portuguese Treasury is filling the State's safes in order to return 6.6 billion to the market in June.
Another debt reimbursement to the market is under way. And the Government is filling the State’s safes in order to return 6.6 billion euros in Treasury bonds maturing next June, the Finance Ministry told ECO. The same is to say that debt is now increasing, but it should plunge in the beginning of the Summer.
Public debt registered the largest increase of almost a year in February. Debt stood 2.4 billion euros higher, raising the total gross indebtedness of the State and public indebtedness to 246 billion euros, the highest amount since September. But there is an explanation for that increase.
In two months, a ten-year Treasury bonds’ line paying a generous annual coupon of 4.45% will mature, and 6,642 million euros must be returned to investors on June 15. This is why the Government is getting itself in more debt to pay later.
According to data disclosed this Monday by the Bank of Portugal, the financial cushion increased 2.2 billion euros in February. There are now 22.3 billion euros in the Portuguese public safes.
When asked by ECO, the Finance Ministry disclosed that “during the first quarter of 2018, a slight increase in gross debt is anticipated, consistent with this year’s financing strategy, but without an impact in net debt”. And the ministry adds: “That is, there will be a proportional increase in deposits, which will be reversed in June, by amortizing the Treasury bonds’ line maturing that month an whose balance ascends to 6.6 billion euros”.
Public debt increases in February
The Bank of Portugal explained the public debt increase in February took place due to State debt securities’ auctions that reinforced public deposits: that month, the Portuguese Treasury raised 1,250 million euros in ten and five-year bonds, as well as 1,100 million in short-term securities. Unlike previous months, this time there were no early reimbursements to the International Monetary Fund.
In March, IGCP returned to the market: it was able to raise 1,250 million euros in ten and 27 year bonds. Another 1,250 were raised in Treasury bills, but in that case, the earnings paid for a 2,667 million euros’ line that matured in March.
Based on this public debt roll over, the institution headed by Cristina Casalinho wants to decrease the costs of debt services. IGCP hopes the States’ indebtedness cost will decrease from 3% in 2017 to 2.8% this year.
