Andalusia has an outstanding debt of 34,000 million euros or, what is the same, each Andalusian would have to pay 4,250 euros to erase the red numbers accumulated by the Board and next year that figure will increase again. According to forecasts, up to 35,750 million. In the midst of the coronavirus crisis, with a notable decrease in income and a vertiginous increase in spending – there is the draft budget for 2021, of more than 40,000 million -, a considerable amount will have to be borrowed. Specifically, Andalusia will need a loan of 6,421 million euros to balance the accounts and almost half of all that money will come, that is the forecast of the Board, from the international debt markets.
The year 2021, irremediably marked by the pandemic and the recession that it entails, will also be the year of Andalusia’s return to the debt markets after the inheritance received from the PSOE -in the form of breach of the rules of expenditure and deficit in 2018- has prevented it in this year 2020 from financing freely. Throughout these twelve months, Andalusia has been subjected to the financial corset of the Autonomous Liquidity Fund (FLA), which ensured the money but also a series of conditioning factors, the direct supervision of the Ministry of Finance and even the obligation to draw up an adjustment plan.
That corset is going to come off next year, once the 2019 financial year closed with all the blessings, and the goal is to get financing cheaper and in the longer term, while the autonomy lost “unfairly” is recovered, as the Secretary General of the Ministry of Finance, Ignacio MÃ © ndez, points out to EL MUNDO, who highlights an added value when returning to the markets: improving the reputation of the Andalusia brand.
The aim of the team led by Juan Bravo is that the markets provide the Andalusian public coffers with a maximum of 3,000 million Euros, while the rest, up to 6,421 million, will be borne by the Financial Facility Mechanism of the Ministry of Finance.
The return is being carefully prepared at the Ministry of Finance after a year in which Andalusia has been absent for investors and the calendar The final issue is yet to close, although in principle three debt issues are being considered throughout 2021, two bond issues aimed at investors in general and a third for private placement. The first would take place, explained Mendez, already in the first quarter of the year.
Expectations are good and, says the Secretary General of the Treasury, “there is an appetite” in the markets for Andalusian debt. And this despite the fact that for next year record issuance of bonds by the Spanish Treasury is expected, “but there is also a lot of liquidity in the markets and very low interest rates, as long as that is maintained, there will be an appetite for public debt, “explains number three from the Treasury.
To this must be added that the rating of Andalusian debt by international agencies is, at the moment, only one notch below the national debt and above that of other communities, such as Catalonia and Valencia.
What’s up demand This is demonstrated by the recent refinancing operation of part of the debt carried out by the Treasury for an amount of 3,500 million euros from the FLA that has been placed with a group of entities and that will allow savings of 44 million euros.
The big news: green bonds
Furthermore, the great novelty of this return to the world financial sphere is that, for the first time in its history, Andalusia is going to issue green bonds. Between 10% and 20% of the total emissions will be green, that is, linked to actions contemplated in the budgets that are identifiable as sustainable, something that corresponds to the agencies and banks in charge of placing this debt.
Green bonds have undoubted advantages, says the Secretary General of the Treasury. The first is reputational in nature and the second, and perhaps the most important, is that there is a specific market looking for this debt and not finding so much offer. For example, MÃ © ndez details, there are sovereign funds, such as the Norwegian, that can only invest in these assets and the interests are usually lower.
Of the 6,421 million that the autonomous community is going to borrow, most of it, 4,400 million will be used for refinance or repay existing debt, with which the new debt would amount to 2,021 million euros. Of these, 223 go to pay the payments on account that are still due from the previous crisis -which are paid annually until 2033- and the other 1,797 million would go to defray the expenses triggered by the crisis.
With everything and despite the economic clouds due to the crisis and the increase in debt, the forecasts of the Ministry of Finance are that in 2021 Andalusia once again complies with the spending and deficit rules and does not exceed the limits set, in this case, as a recommendation by the Ministry of Finance. “The drop in taxes is being important but not so bad,” says Ignacio MÃ © ndez, and income from personal income tax or VAT is growing, which will allow the numbers to add up again. If the pandemic does not prevent it.
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