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Euro Hopeful Bulgaria Selling Bonds in Two Tranches to Fund Debt



(Bloomberg) — Bulgaria sold bonds on international markets for the third time in 14 months as it seeks to cover its deficit and repay debt in preparation for potentially joining the euro area.

Commercial and residential property stand on Sveta Nedelya Square at dusk in Sofia, Bulgaria, on Tuesday, May 15, 2018. The EU’s poorest-nation, which holds the bloc’s rotating presidency, has already pegged the lev to the euro and wants to join the exchange-rate mechanism — the precursor to adoption– this summer. Photographer: Jasper Juinen/Bloomberg , Bloomberg

(Bloomberg) — Bulgaria sold bonds on international markets for the third time in 14 months as it seeks to cover its deficit and repay debt in preparation for potentially joining the euro area.

The government in Sofia sold €1.3 billion ($1.4 billion) of bonds maturing in 2031 and another €1 billion of 2036 notes, according to a person familiar with the matter, who asked not to be identified. It pulled in orders of more than €6.5 billion for the combined sale.

Bulgaria needs to fund a budget deficit estimated at 2.5% of economic output this year, keeping it within European Union criteria needed to join the euro in early 2025.

The Balkan country last tapped the international markets in January, selling €1.5 billion in 10-year bonds, and can offer as much as €2.3 billion more by year-end, according to this year’s budget bill. The government, which needs to repay €1.5 billion in 10-year debt maturing next year, acquired the full amount.

Prime Minister Nikolai Denkov’s coalition cabinet took office five months ago, uniting old-time political rivals with a vow to move euro-area and Schengen accession processes forward, and to keep the country on its European path amid a political and economic crisis deepened by Russia’s war in Ukraine. 

For years, Bulgaria has met the formal criteria for adopting the euro, with relatively low deficits and the EU’s second-lowest debt level. It may struggle to meet the inflation target, however, since Russia’s invasion of Ukraine boosted global and local energy prices. 

On Thursday, the government raised this year’s harmonized average annual inflation estimate to 9.1%, up from 8.7%. It expects it to fall to 4.8% next year.

Last month, Fitch affirmed Bulgaria’s long-term foreign-currency debt rating at BBB, on par with Peru and Kazakhstan, with a positive outlook reflecting the prospects for euro adoption.

Source : BNN Bloombreg

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