External debt is an important economic indicator that reflects the financial health of a country and its ability to service its obligations to foreign creditors. This debt includes all liabilities of the state, enterprises, and financial institutions that are raised from foreign sources. It can include various types of liabilities – loans, bonds and other financial instruments.
Data for the first half-year
Bulgaria’s gross external debt at the end of June this year amounted to 44.064 billion euros. This means an increase of EUR 316.6 million (0.7%) compared to the previous year’s level. This is according to preliminary data released by the Bulgarian National Bank (BNB). Thus, the gross external debt of our country represents 44% of the estimated gross domestic product (GDP).
For comparison, at the end of June of the previous year, it amounted to 43.747 billion euros, which is equivalent to 46.6% of GDP.
At the end of June, short-term liabilities amounted to EUR 8.309 billion. This marks an increase of 1.8% year-on-year.
Long-term liabilities are estimated at EUR 35.754 billion. They increased by 0.5% in one year.
The BNB data show that at the end of the first half of the year EUR 26.106 billion, or 59.2% of gross external liabilities, had a remaining maturity of more than one year. 79.8% of gross external liabilities are denominated in euro. In 2023, they were slightly higher at 80.6%.
How gross external debt looks by sector
The gross external debt of the general government sector stood at €10.306 billion at the end of June. Within a year, it has increased by 9.1%.
The central bank’s external liabilities have also increased. At the end of June, they amounted to EUR 2,010 billion, which means 2.2% annual growth.
The external liabilities of the other monetary financial institutions sector (banks and money market funds) are estimated at EUR 6,939 billion. The increase is 2.3% compared to the end of June 2023.
External liabilities of businesses and households amount to EUR 12,224 billion. This means an increase of 3.4%. within one year.
Domestic lending, on the other hand, has fallen in the current year. At the end of the first half of the year, it amounted to EUR 12.582 billion. The result is EUR 1.144 billion (or 8.3%) less year-on-year. The difference is most pronounced in the structure of external debt – 28.6% at 30 June 2024, compared with 31.4% at the same point in the previous year.
On August 28, the Treasury successfully floated bonds in three tranches denominated in euros and US dollars in the international capital markets. The total value of the bonds was €3 billion and US$1.5 billion, which is part of the Medium-Term Global Debt Issuance Programme in the international capital markets. This is practically the first time since 2002 that Bulgaria has issued bonds on external markets denominated in dollars.
The debt operation is within the set maximum amount of BGN 11.7 billion, which is set in Bulgaria’s state budget law for 2024. From the information provided, it is clear that BGN 10.7 billion of it is earmarked for market-oriented debt financing in the form of government bond issues.
The debt financing raised so far this year amounts to BGN 1.7 billion and has been realized through the placement of government securities on the domestic market in April-August 2024.
Managing gross external debt is critical for the country’s financial sustainability. Despite the country’s external debt increase, it remains below 50% of GDP. High gross external debt is a prerequisite for potential repayment problems, especially when there is significant foreign exchange risk. On the other hand, its good management, active monitoring of economic indicators, and cooperation with international financial institutions can lead to economic stability and long-term growth.