Latvia to Need Around €4.3 Billion in Borrowing Next Year

Latvia's total borrowing requirement on financial markets next year is provisionally estimated at €4.3 billion, the State Treasury told the news agency LETA.

Raised this year

Since the start of the year, the state has borrowed €2.7 billion. In June, a €1 billion sustainable bond issue was carried out on international markets, and bonds worth the equivalent of €140 million were issued in Switzerland. The country received €525 million under the European Commission's SAFE loan, while additional auctions of euro bonds with various maturities raised €600 million. Residents purchased savings bonds worth €478 million. Roughly another €1 billion is planned to be borrowed by the end of the year.

Interest costs

The Treasury says that, given rising interest rate trends, geopolitical risks and the European Central Bank's monetary policy, interest expenses are expected to grow in the coming years. The increase will be gradual and depend on fiscal policy, the size of the budget deficit, market rates and Latvia's credit risk premium, which reflects investors' view of the country, its credit rating and geopolitical factors.

At the same time, 92% of government debt obligations are fixed-rate, mainly government bonds of various maturities with coupon rates set at issuance. As a result, changes in current market rates will have a limited effect on debt servicing costs in the near term.

Use of the funds

Of the resources borrowed in 2027, €2.755 billion will go toward repaying debt incurred in previous years, including euro bonds maturing in early 2028. The remaining funds are needed to cover the planned budget deficit and to issue state loans.