September 23 (SeeNews) - If expenditure remains at the level projected in Macedonia's 2017 draft budget, the government will be forced to issue two Eurobonds to cover it, a government official has said.
Even though the budget does not say explicitly that the government should issue Eurobonds to finance budget deficit, the document provides for a fresh foreign debt worth 17 billion denars, additional deputy finance minister Kire Naumov said in an interview with local broadcaster TV21 late on Thursday.
The government adopted late on Sunday the 2017 budget draft which projects a deficit of 18.6 billion denars ($338.4 million/301.7 million euro) equivalent to 3% of the planned GDP, down from 4% projected for this year in the latest revision of the 2016 budget. Budget expenditure is planned to reach 206.22 billion denars next year, an increase of 4.5% compared to 2016.
So far, Macedonia has issued Eurobonds every three or four years, not every year, Naumov, added. If Macedonia would take fresh foreign debt next year, this would dent its creditworthiness and lead to more unfavourable interest rates.
Macedonia relaunched in July the sale of a seven-year Eurobond worth 450 million euro that will yield 5.625%. In November 2015, Macedonia raised 270 million euro through the sale of a five-year Eurobond on international markets. The volume was lower than the initially planned borrowing of 500 million euro due to a veto by Kire Naumov, a deputy finance minister at the time.
In the interview, Naumov commented on the government's claim that increased expenditure in the 2017 budget draft reflected plans for record high capital investments. In 2009 and 2012, Naumov said, the amount planned for capital investments was even higher but those plans had never been really implemented.
According to Naumov, the adoption of the 2017 draft budget by Macedonia's interim government was just a formal step made under pressure from the leader of the ruling VMRO-DPMNE party and former prime minister Nikola Gruevski. The parliament is expected to be dissolved on October 12 ahead of early elections scheduled for December, which will make it impossible to approve the budget within the specified legal timeframe.
Naumov also expressed concern about the level of public debt, which is projected to reach the equivalent of 50% of the country's gross domestic product (GDP) by the end of the year.
"It is an alarming situation for a country like the Republic of Macedonia," Kire Naumov said. "This level of public debt is already unsustainable."
Several additional ministers and deputy ministers from the main opposition Social Democrats (SDSM) party, including Naumov, were appointed at several ministries in Macedonia earlier this month as members of the interim cabinet, which is in charge of preparing the early elections scheduled for December 11. The snap vote is part of an EU-brokered deal aiming to solve the 19-month old political crisis in the country.
(1 euro = 61.6538 denars)