Public debt will be reduced to 112.4% of GDP and the Treasury will capture 256,930 million, 8.2% more

Debt interest expense grows 3.6% due to the rise in interest rates, to 31,275 million

MADRID, 6 Oct. (EUROPA PRESS) -

The debt of the public administrations as a whole will end the 2023 financial year at 112.4% of GDP, below the 115.2% forecast for 2022, according to the projections of the General State Budget Bill (PGE) of 2023, which also foresees the gross issuance by the Public Treasury of 256,930 million euros, which represents an increase of 8.2% compared to what is estimated for this year, due to the rise in interest rates.

As in recent years, the bulk of the expected gross issuance will be concentrated in Treasury bills and in government bonds and obligations.

However, since the outbreak of the pandemic, Treasury securities issues have been supplemented by new sources of financing from the European Union.

Thus, since 2021 Spain has been receiving a high volume of transfers from EU funds after the pandemic within the framework of the 'Next Generation EU' (NGEU) programme.

In addition, in 2022 the Treasury has reopened the green bond through the auction procedure, which was issued for the first time in September 2021 and has become a structural component of the Treasury's financing strategy.

For this reason, the Government indicates that new reopenings of the green bond can be expected in 2023 to contribute to the financing of Spain's commitments to the ecological transition.

For its part, the net indebtedness of the Public Treasury in 2023 will be reduced by 5,000 million euros, to 70,000 million. Breaking down by type of instrument, the Treasury Bills are expected to provide negative net financing of 5,000 million, so that the State bonds and obligations, together with the rest of the debts in euros and in foreign currency, will contribute the remaining 75,000 million.

The average life of the State Debt will stabilize next year at around 8 years, "historically high levels" that contrast with what happened during the financial crisis of the past decade, according to the Government, which indicates that despite the normalization of monetary policy and the "complexity" of the current context, the "resilience" of the debt portfolio accumulated in recent years is maintained and consolidated.

The Executive indicates that since the end of the first quarter there has been a general rise in yields in the debt markets derived from higher inflation and the tightening of monetary policy.

Despite the above, the average cost of the State Debt in circulation continues to remain at "historically low" levels, standing at 1.61% at the end of August 2022, below the 1.64% at which it closed 2021 .

The Government expects that the average cost will continue to increase in 2022 and 2023, although very gradually due to downward pressure as old references with high coupons expire and are replaced by new references with lower coupons, as well as by the low risk of refinancing the portfolio, so that only a small percentage of the debt must be refinanced each year and is exposed to the highest interest rates.

As for public debt, the item linked to its cost amounts to 31,275 million, 3.6% more, due to the expected increase in interest rates. The cost of debt has a weight of 6.9% of total spending.

The figure is almost double the interest on the debt in 2008 (15,265 million), when public debt did not represent more than 34.3% of GDP and now exceeds 116% of national wealth.