Finance Ministry has given in. Pressured by the higher and higher need to finance the budget, after two months in which it had systematically rejected all the bids from banks that were trying to push interests up, the Treasury has agreed to borrow at higher costs. On the other hand, NBR attracts money from the market for a higher interest in order to keep inflation in check.
Empty-pocketed, the Finance Ministry gave up the political message of maintaining the interests as low as pushed in March and pledged to pay 14% for three years, after having clung on to the 12.5% interest for four auctions in a row.
The interest for the two-year maturity rose to 15% from 14.2%. The most visible sign of the cash shortage the Finance Ministry is experiencing was shown during the auction on Wednesday, when the three-year dollar denominated bonds were sold for 5% interest. All this considering the Finance Ministry had tried to impose 4.5% as yield several weeks ago, and had eventually managed to raise only $183 million of the $300 million targeted. A similar attempt in April, when $200 million were offered, was met by banks with a demand for only $55 million, as they felt the yield was much too low.
The IMF experts found the general consolidated budget revenues in March were lower than anticipated. Collection was below the level scheduled in the first quarter, as well. This is precisely why the IMF experts deemed the Government decision to postpone rising fuel excises for June 15, in case collection did not improve, as "regrettable."
Under the circumstances, the deficit was possible to contain within the limits set only by cutting spending. The Finance Ministry has yet to release the budget statistics for the first quarter. Finance minister Mihai Tanasescu, however, says budget revenue collection in April was "very good."
The Finance minister said he wanted to meet with the Romanian Banking Association representatives this week to tell them "the State will not pay higher interests."
"They've just grown accustomed to investing in government securities. Lending has to go up now. They must feed more money into the economy," Mihai Tanasescu says. "We will keep rejecting bids for higher yields. We would not do it, if we could not afford it," Tanasescu said before the auction on Wednesday when the Finance Ministry agreed to pay 5% yield for the three-year dollar denominated bonds.
The Treasury is planning to resort to cash management operations more and more often, as its new operating law allows it.
"We will finance short-term needs with short-term loans. Such operations will become ordinary. There's simply no point in ruining the long-term benchmark by pushing interests up while pressured by temporary needs," Enache Jiru, head of the State Treasury said.
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
