Gujanicic: Serbia, like Croatia, Could Sell Bonds to Citizens, Instead of Abroad

Serbia, like Croatia, could sell government bonds to citizens in order to collect the missing money it needs for the budget and at a lower interest rate than in the international capital market, if it wanted to and if it removed some smaller obstacles, said Nenad Gujanicic, an analyst at the brokerage house Momentum Securities.

– The Republic of Serbia, if it wanted to, could sell bonds to citizens, because there are no obstacles to it, except that it would have to create a campaign and educate them to invest the savings money into bonds. The state would thereby go against the banks a bit, which have the dominant position in the financial market – Gujanicic said for Beta.

As he said, both the state and the citizens would benefit from it, because the interest rates in the bonds market which mostly professional investors trade on have suddenly risen since last year, and the banks which are superior to their clients are increasing them more slowly.

On February 22, Croatia offered its citizens the first Croatian national bonds at a minimum investment of EUR 500 and, so far, they have been bought by around 43,000 people and EUR 1 billion has been collected. Croatia thereby wanted to redirect part of the savings of around EUR 35 billion which citizens have in banks, at relatively low interest rates, below 0.5% a year, and pay them an annual interest rate of 3.25%, and the bonds are due in 2025.

Gujanicic said that banks in Serbia provided an interest rate of 3% to clients for savings in euros for a period of three years, and that the yield on bonds with that or a slightly longer period was twice as high.

– Due to that difference in interest rates, there is room for the Republic of Serbia to issue some securities for three years and offer them to citizens with a yield rate of 4%, instead of selling them in the international capital market with an interest rate of 6-7% – Gujanicic said.

He added that it would also be an incentive to the development of the financial market in Serbia and the possibility of educating the citizens that they don’t have to invest only in real estate and bank deposits.

He pointed out that, in Serbia, citizens had around EUR 13-14 billion in savings in banks and that nobody expected all those funds to be drawn out, but added that it would be a “fantastic” success if the state would collect EUR 1 billion through bonds, which would be only 6-7% of the total savings.

According to him, the problem with the banks is that, in the past few years, their credit activity has not grown and they also operated in an environment of low interest rates until last year, so they have had little maneuvering space for a high profit margin.

Momentum Securities a.d. Novi Sad

Nenad Gujaničić

government bonds

sale of government bonds to citizens

savings in banks