(Bloomberg) -- Poland will likely start its foreign-currency debt issues next year with a euro bond sale as the US-dollar market has become less attractive, according to a senior Finance Ministry official.
The sovereign plans to issue 42.9 billion zloty ($10.5 billion) of foreign debt next year on top of 252.1 billion zloty in zloty-denominated notes, according to the draft budget. The bulk of sales on international markets will likely take place in the first half of the year, Karol Czarnecki, who heads the Finance Ministry’s public debt department, told Bloomberg.
“The demand that has been reported recently from the euro market makes us optimistic about volumes and cost parameters,” Czarnecki said. “US dollar issues have slightly lost their appeal compared to the euro market in 2024, but this doesn’t mean we won’t be there as well.”
Besides benchmark-sized issues in euros and dollars, Poland also plans sales of green bonds and yen-denominated debt next year, he said.
Back at home, the Finance Ministry will return to selling T-bills, which were last issued during the Covid pandemic. Since then, Poland has solely sold bonds with a longer maturity horizon.
“Meeting market expectations is the main reason why we are back with T-bills,” Czarnecki said. The ministry would like to sell T-bills “regularly,” or at least once a month, he added.
High spending on the military due to Russia’s war in neighboring Ukraine, as well as social outlays ahead of presidential elections expected in mid-2025 have bloated Poland’s budget, with the fiscal shortfall set to stay above 5% of economic output for a third straight year in 2025.
Czarnecki said concerns over fiscal performance weren’t justified “because our financing process is going smoothly, as 2024 has shown.” Poland will enter 2025 with more than 20% of its annual borrowing needs already covered, Finance Minister Andrzej Domanski said this week.
Furthermore, the stand out performance of Poland’s economy — relative to its peers in eastern Europe — will “work to its advantage,” Czarnecki said. Domanski expects gross domestic product to expand nearly 4% next year, while bank economists are less upbeat, forecasting 3.5% growth.
Czarnecki said that recent central bank comments signaling that interest rates won’t be reduced next year won’t have a significant impact on the debt servicing costs. The yield on 10-year government bonds now stands at 5.87%, compared with an average of 5.52% in 2024.
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