Government turns to repos to service its mounting debt

The government’s reliance on repurchase agreements, or repos, to meet its obligations rose by 1 billion euros in the second quarter of the year, reaching 12.1 billion euros by the end of June and negatively impacting the liquidity of the banking system, according to figures from the Public Debt Management Agency (PDMA).

The news comes as the government continues to struggle with reducing its debt in the face of a recent round of repayments and difficulty in replenishing state funds due to late or nonpayment of debts to the state by citizens.

The government’s economic team began making use of repos as a quick method of borrowing, especially during summer 2015, when negotiations with the country’s creditors were particularly tense and liquidity in the banking system was extremely poor. This practice caused a jump in the amounts under repos.

According to the PDMA, repos came to 8.6 billion euros at the end of 2014, 10.5 billion in June 2015, 11 billion by late March 2016, and have now jumped to 12.1 billion euros.

The PDMA’s bulletin revealed that the government’s current available cash resources are 3.1 billion euros, up from 2.08 at end-March, and that the debt service account improved from 63 million to 5 billion euros.

Public debt reached a total of 328.3 billion euros at the end of the second quarter, up 7.3 billion from the 321 billion euros in the first quarter. This was due to the disbursement of the tranche of 7.5 billion euros in emergency funding paid to Greece by its creditors to mostly service bond repayments to the European Central Bank.

According to data for new borrowing in 2016, 33.5 percent of the government’s new debt is composed of loans from the European Support Mechanism (ESM) and 66.5 percent from T-bills.

The 328.3-billion-euro debt can be broken down as follows: 74.57 billion relates to bonds and short-term securities (of which 57 billion is in bonds issued within the domestic market); 235.76 billion is loans, of which 225.9 billion is from the ESM.

The weighted average maturity of the new debt has dropped this year to 10.8 years from 16.08 years in 2015. The weighted average of the remaining natural maturity of the entire central government debt on June 30, 2016 stood at 16.67 years.

The figure for outstanding guaranteed debt stood at 13.9 billion euros at the end of June compared to 13.7 billion at the end of March 2016.

The activation of guarantees payments in the first half of the year came to 676.9 million euros, of which 609 million relates to the Hellenic Railways Organization.

The government is facing T-bill maturities and IMF repayments through the rest of the year.