LONDON (Reuters) – Serbia aims to make its local debt compensable by the end of the year and to increase foreign holdings in its debt markets to 40% in the near future, the country’s finance minister said. country, Sinisa Mali.
Making local debt Euroclear means that investors could then settle through Euroclear. The Belgium-based firm specializes in domestic and cross-border securities settlement and custody for bonds, equities and derivatives, making trading easier for international investors.
The Serbian government is expected to sign the terms of an agreement with Euroclear in October.
“For me, this is the icing on the cake… We will do everything we need to do in the next two months,” Mali told Reuters after signing a memorandum of understanding with Euroclear.
“We are going to work on this process and have euro-compensable bonds, maybe even as early as the end of this year.”
Access to an international settlement system generally brings more foreign capital into a market and often lowers bond yields, as was the case in Russia, where ruble debt became “euroclearable” in 2013.
Mali said it hoped this would help attract more foreign investors to Serbia, the largest of the Western Balkan countries.
“Euroclearability will broaden the base of international investors, so I expect a huge jump of 30% to 40%,” Mali said, adding that it hopes that eventually half of all local bonds would be owned by foreign investors.
IMPROVED RATINGS
Mali said the government was in regular contact with rating agencies and Serbia was in line for its first investment grade rating.
“We expect that as early as this year,” he said.
S&P Global Ratings and Fitch have upgraded Serbia to BB+ – one notch below investment grade – over the past five months. S&P also has a positive outlook, citing strong FDI inflows and fiscal discipline.
The government plans to issue about 230 billion Serbian dinars ($2.14 billion) of debt in local markets and another $2 billion in international capital markets, denominated in euros.
The government has stepped up its capital spending plans, pledging to spend around 14 billion euros ($15.3 billion) over the next five years to improve living standards and infrastructure.
The investment plan precedes the legislative elections scheduled for the end of April. President Aleksandar Vucic’s ruling Serbian Progressive Party has faced anti-government protests and scandals involving senior officials in recent months, and the opposition has said it will boycott the vote.
Mali said the government is considering adding a Chinese yuan-denominated instrument to its debt mix in the coming years and may also issue a green bond in domestic and international markets in 2021.
Mali also hoped that Serbia’s local currency bonds would be included in the widely followed JPMorgan Government Bond Index Emerging Markets (GBI-EM) within the next two months after being added to the index provider’s watchlist. about 10 days ago.
The Minister said that the Serbian economy is on track to accelerate its economic growth to 7% over the next five years.
“The worst of the austerity measures are behind us, now is the time to grow,” he said.
Reporting by Karin Strohecker; Editing by Gareth Jones
