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Reuters: the Romanian government loses the battle for the reduction of lending costs

The Romanian government loses the battle for the limitation of lending costs and risks to have to pay to investors more money, if they do not accept the discounts imposed by them to buy bonds, according to a Reuters analysis.

The authorities tried to sell bonds at profit considered acceptable by the officials and refused to get over the threshold of 7% but yields have much chance to increase not to decrease, due to the austerity measures what stop the economic relaunching and the instable government, the agency says.

According to Reuters, Romania has to borrow 19 billion lei until the end of this year, if the IMF money continues to be approved and the bonds in euro with maturity in November are refinanced.

The ministry of finances sold until now, in July, bonds of only 982 million lei, out the 4.65 billion lei planned, all operations with maturity of at most one year. « The whole appetite for assets will drop. The general financing environment will become more difficult' the economist Neil Shearing from Capital Economics, London warns.

The minister of finances announced that they hoped to collect money from bonds in euro on the domestic market, including one programmed for next week, but to appeal to international capital markets, Reuters says, adding that the governers had no details regarding the financing needs of the second half of the year.

'The financing needs increase and the financing in euro on the local market could be a good diversity' the head economist of UniCredit Rozalia Pal says.

The economists say that the cash reserves of the government could cover the needs for maximum one-two months, but the state is not in danger not to honor their obligations and has several possible solutions, besides the payment of high yield, the press says.

Bonds of 1.4 billion euro with November maturity were a reason for worry, but the analysts consider the Government showed they could cover this maturity by a loan club on short term of by bilateral agreements with local banks.

But, while these options cover the need for financing, the real problem is postponed.

The head economist of ING Bank, Nicolaie Alexandru Chidesciuc, considers that Bucharest could opt for payment delay, for example, VAT reimbursement to companies – a structural mistake which stop the cash inflow – as long as they continue to pay salaries and pensions in the public sector.

« They must draw liquidity as soon as possible, even by paying higher yield. Otherwise, they will have to pay higher yield by getting nothing' he said. The solution to pay higher interest to sell governmental bonds is, by far, the best option at the disposal of the government, especially as the banks would accept yield of 7.7-7.8% for yearly debts, Chidesciuc says.

These levels are low by comparison to the borrowing costs of the last period of last year, when Romania paid over 10% following the stand by in the IMF agreement. The government must stay in IMF graces, especially after the institution withdrew last week from the discussions with the Hungarian authorities, Reuters says. The final solution of ' panic' Bucharest could use is to ask for more money from IMF according to analysts.

Sursa: http://www.actmedia.eu

Tags: financing could reuters bonds government costs ing euro

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