Filenews 18 September 2021 - by Theano Thiopoulou
Half a billion euros are paid each year by the state to service the debt, despite the historically low interest rates it pays. The inflation of debt, at levels above 100% of GDP, has maintained its service costs, even in an environment of low interest rates.
According to data from the Ministry of Finance, the cost of servicing the public debt, which in total amounts to €24 billion, from €478 million. in 2018 it increased to €530 million. and is expected to remain at the same level in 2022. According to data from the Public Debt Management Office, a debt of €1.92 billion expires in 2022. and €1 billion. concerns foreign debt instruments and €829 million. domestic securities. In 2023, debt maturations are reduced to €1.39 billion. to increase to €2.35 billion. in 2024.
For the purpose of reducing the risk of refinancing, the main objective of the Public Debt Office, according to the Fiscal Risk Report 2022, "is to limit long debt maturities to individual or even consecutive years, smoothing out, to the maximum extent possible, the debt repayment schedule. Particular emphasis shall be placed on the debt ratio maturing within one year and within five years, indicators which are well comparable to those of the EU average."
To keep interest rate risk at acceptable levels, new borrowing in most cases is at fixed rates. The overall policy on foreign exchange rate risk is to issue debt in euro only. The exchange rate risk that existed was reduced to zero with the repayment of the loan to the IMF.
In the coming months, according to the report, the factors that will affect, among others, the purchases of government bonds are:
- The path of inflation,
- The period of recovery from the pandemic,
- The continuation or strengthening and/or withdrawal of the ECB's quantitative easing programme and the bond purchase programme;
- Any change in interest rates, and
- The volume of new issues that will be made under the European Recovery and Resilience Facility.
The largest share of public debt at the end of 2020 was for government European Medium-Term Bonds (EMTN), with their share approaching 50%, while official loans from international organisations, the largest part of which concerns loans from the European Stability Mechanism, constituted 32% of public debt. The average maturity of the debt was 7.9 years, while the tradable debt, i.e. government securities excluding loans, was 8 years at the end of 2020 compared to 7 years at the end of 2019, an increase attributed to the issuance of longer-term EMOs with the largest debt due maturing in 2050.
This result is in line with the Medium-Term Public Debt Management Strategy (NSA) of the Public Debt Management Office (DGSS), which aims to keep the average remaining maturity of tradable debt above the 7-year limit. The debt at variable and fixed interest rates constituted 29% and 71% of the debt respectively, while the foreign currency debt was wiped out (0% of the total public debt) after the CST proceeded to early repayment of the outstanding loan to the International Monetary Fund (IMF), whose last payment would normally be in 2026.
