The Republika Srpska, one of the two Bosnian entities, is preparing to borrow € 350m via the London Stock Exchange to cover its budget deficit.
The issue will allow Republika Srpska to finance its spending after Bosnia and Herzegovina‘s failure to strike a new deal with the International Monetary Fund (IMF).
Concerns were expressed about the increase in indebtedness of the entity, although the Prime Minister of Republika Srpska, Radovan Viskovic, said on April 18 that the issuance of the securities does not represent any additional debt but is expected by the budget.
“It is a regular debt that is provided for in the budget. And no new debt. Serbia and Montenegro is doing the same. And everyone normal. Everything is public, everything is transparent, ”said Viskovic, quoted by the Bosnian media.
Viskovic commented on the matter after much speculation in Republika Srpska that a major new international fundraiser was on the way.
Further details emerged on April 20 when Societe Generale announced to the London Stock Exchange that between April 20 and April 30 there would be a period of price stabilization of the bonds that Republika Srpska intends to sell. for an amount of 350 million euros.
Analysts questioned the amount of the loan. “Late last year, we published a few reports that predicted this behavior of entities – in the context of borrowing. This is because negotiations with the IMF collapsed in December. However, this decision, the amount, considering the total debt of the entity of Republika Srpska, is absolutely unexpected, ”macroeconomic analyst Dr Admir Cavalic told bne IntelliNews.
“This is the eighth round of borrowing since the start of this year, which shows that there are serious fiscal stability problems in Republika Srpska. This is why I am partly skeptical of the success of the issue – it is entity bonds, not government, with certain risks, that will certainly determine the price / success of the loan. The State does not support this loan in terms of guarantees. There is likely to be some support from neighboring Serbia… I note that the current indebtedness of Republika Srpska is already over 50% of GDP, which may not be much for them. developed economies and sovereign states, but that’s for an entity that doesn’t have a clear strategy for future development, ”Cavalic added.
The budget of the Republika Srpska is planned at 3.8 million BAM (1.9 billion euros). He only has nearly BAM 1 billion in his own income, which also includes money from social and pension funds.
Earlier in 2021, it was reported that Republika Srpska is planning to borrow BAM 187million by issuing bonds and treasury bills this year, and is expected to borrow mainly in the domestic market.
Bosnian politicians have repeatedly failed to make the political compromises necessary to secure a new deal with the IMF, though the fund is said to be ready to sign a new deal worth € 750m to help Bosnia to overcome the coronavirus crisis.
Previously, Republika Srpska placed its first Eurobond on the Vienna Stock Exchange in June 2018, following a series of “exotic” bond issues from the EEC / CIS region. However, he failed to sell the entire € 200m issue.