Finance Ministry trying to borrow over 4 billion RON
The state has a
payment peak in July and dealers say it might have to pay 8-9% in
yearly yields if it wants to borrow as much as it needs.
The Finance
Ministry is seeking to borrow 4.6 billion RON (slightly over one
billion euros) from banks in July, considering it needs about three
billion RON to pay for T-bills maturing this month. In addition,
the state also has to repay 700 million euros for some eurobonds
falling due.
A tough battle over
yields is thus taking shape, after the Treasury could afford to
"twist the arm" of the banks in June, keeping yields on RON at less
than 7% a year, at the cost of raising only one quarter of what it
had set out to.
Last month, Finance Minister Sebastian Vladescu
started to talk about pressures from banks, which demanded yields
in excess of 7% a year. Meanwhile, things have become more
complicated as far as the Finance Ministry is concerned, with the
Constitutional Court ruling against the pension cut, which led to
the need to raise VAT from 19% to 24%, which hurts the economy
directly. Unless something comes up, the IMF Board should approve
the fifth tranche of the loan for Romania, worth 900 million euros.
This money goes into the NBR reserve, though, so that the Finance
Ministry has to raise cash from the market.
The only help for
the Finance Ministry might come from the NBR, which might leave
more RON the market, to keep interest rates down. The National
Bank, however, is now in a difficult position, as it has to cope
with the pressure towards a depreciation of the RON.
"How high the yield
on T-bills will go depends on the exchange rate trend, on the
extent of RON's depreciation. If there are pressures on the
exchange rate and it reaches 4.4 or 4.5 RON/EUR, then the yields on
T-bills could go up to 8 or 9%. If not, the central bank will try
to leave some cash on the market for the Finance Ministry to
borrow," a dealer commented.