BAKU, Azerbaijan, May 27. The repayment of Eurobonds to investors last year caused a significant reduction in the foreign government debt, while new loan agreements with variable interest rates were signed during this period, the opinion of the Chamber of Accounts on the draft law "On the execution of the 2024 state budget" said, Trend reports.
Compared to the previous year, direct foreign government debt decreased by 20.6 percent, amounting to $5.13 billion. The significant decrease in the volume of foreign government debt compared to the beginning of the reporting year is mainly related to the repayment by Azerbaijan of $900 million (1.53 billion manat) in circulation out of the $1.25 billion nominal amount of foreign currency denominated government securities (Eurobonds) issued in March 2014 to foreign investors.
During the year, based on foreign debt agreements signed for direct foreign government debt, a total of only $101 million was actually attracted, but during the same period, principal debt obligations of $1.37 billion, which is 13.6 times more, were repaid to creditors.
During the reporting year, the government of Azerbaijan signed two loan agreements with variable interest rates totaling the equivalent of $228 million:
➢ $131.5 million from the Asian Development Bank at Sofr+0.6
percent
➢ $96.5 million from the Islamic Development Bank at USD 10Y
mid-Swap Rate+2.15 percent
"Recently, since foreign financial institutions have reduced credit offers with fixed interest rates, new borrowings are mainly obtained with variable interest rates. In this context, it should be noted that the presence of variable interest rate loans in the current foreign government debt structure, as well as the designation of foreign government borrowing as a priority direction from this year and the likelihood that new loan agreements will be attracted on a variable interest rate basis, create the risk of increased debt servicing costs in conditions of fluctuating reference interest rates in global financial markets and currency exchange rate instability.
At the same time, considering the current situation of the domestic market and the alternative of foreign borrowing, careful evaluation of the conditions of new foreign government borrowings, efficient use of funds, and directing the obtained funds to additional income-generating sectors are of particular importance for maintaining economic stability," the opinion noted.
