The finance minister this Wednesday warned of the risk of financing a state, whose loans are mainly retail, with early repayments possible, compared to loans taken out through securities issued on international markets.
During a parliamentary hearing at the Budget and Finance Commission (COF), Fernando Medina stressed that Savings Certificates (CA) cannot carry the same weight or perform the same functions as Treasury Bonds (OT) in government financing.
While CAs are a retail product, that is, through which the state finances itself with small investors, such as families, treasury bonds or treasury bills are debt securities issued by the Republic in the international market for large investors.
The minister recalled that, for example, government bonds with a maturity of 10 years are a security issued with a fixed interest rate during that period, while CAs have a variable interest rate and can be withdrawn at any time by the holders of this instrument.
That is, while the CAs allow for early repayment, the OTs provide the State with greater cost predictability over that period and greater stability, since ultimately, if there were a ‘run’ on repayments, the Republic would have to fund in the market on less favorable terms.
“There is and cannot be a substitution of one instrument for another. It would be a mistake in the management of Portugal’s debt,” he said, defending the role of the OTs in the state’s financing structure.
Asked several times about the remuneration of series E collective agreements (with a maximum basic rate of 3.5%) and their replacement by the new series (with a maximum basic rate of 2.5%), Medina defended that “the compensation that the current series of issues is higher than what the honorable Members mentioned, is the average remuneration for deposits from Portuguese banks”.
The supervising minister also criticized the Technical Cell for Budget Support, which believed that it is more expensive for the State to finance itself on the market than via CA.
In a report released Monday, the unit coordinated by Rui Nuno Baleiras argues that the 10-year-old OT is “the most expensive option for the state in any quarter of its 10-year life,” while the “Series F” from the CA it is the cheapest financing option “in any quarter up to the middle of the 53rd quarter of life”.
For Medina, UTAO’s report is “not one of the happiest moments of this institution”.
Source: DN
