Theano Thiopoulou
The state has money to pay for its needs by August 2022 and there is no risk of running out of cash. As a result of the significant liquidity reserve, this risk is at very low levels, as the cash available at the end of August 2021 exceeds the financing needs of the next 12 months.
According to the medium-term public debt strategy 2022-2024, which was published yesterday by the Public Debt Management Office, this period “is characterized by manageable financing needs, despite the impact of the Covid19 pandemic on public finances.”
In relation to the size of the economy, gross financing needs will range between 5.2% and 9.7% of GDP over the three-year period. Gross financing needs for 2022, according to the report, are € 2.3 billion, in 2023 are € 1.6 billion and in 2024 increase to € 2.4 billion. Long-term debt maturity is € 1.9 billion. billion, 2023 is € 1.4 billion and 2024 is € 2.4 billion.
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The Public Debt Management Office has defined a specific strategy, but the main pillars for the period 2022-2024 remain at the same levels as in the previous period. For the refinancing risk reduction guideline, four quantitative targets were set. The short-term debt target has been reduced by 2 percentage points, compared to the current strategy, and should not exceed 3% of total outstanding debt for the period 2022-2024. . The main source of financing for the coming years will be the international bond market, through the issuance of European Medium-Term Bonds and the maintenance of the average remaining term of the marketable debt, not less than 7 years is becoming particularly important. This, combined with the next quantitative indicator, which refers to the reduction of annual financing needs below 10% of the respective GDP by the end of 2030. The fourth quantitative target, which is one of the most important indicators of reducing refinancing risk, in view of and the possible emergence of a new wave of the Covid-19 pandemic, concerns the maintenance of cash available to meet the financial needs of the next 6-9 months (with a special emphasis on 9 months) compared to a period of 9-12 months in the current strategy. This differentiation is attributed to the reduction in uncertainty associated with the Covid-19 pandemic.
For the bond purchase program by the ECB
Regarding the European Central Bank (ECB) policy to end the bond market, the Office of Public Debt Management notes in the report that for the pandemic from March 2022, such a development, when it occurs, is expected to affect the demand for the purchase of bonds of the Republic of Cyprus, as well as the cost of borrowing “.
