The State Borrows to Repay Its Old Eurobond: Interest Alone Will Cost About 397 Million Euros in 2027

The state is borrowing to repay what it has already borrowed. Finance Minister Gordana Dimitrieska-Kočoska announced a new citizens' bond before the end of 2026, and new foreign borrowing is being prepared for 2027, mainly to repay the Eurobond issued in 2023. That bond matures next year, and 500 million euros have to be found for it.

Borrowing to repay

On September 29 the government approved the option of borrowing up to 250 million euros on the international market, and a few days later the state actually borrowed 150 million euros at an interest rate of 5.25 percent. The minister says the borrowing is within what was planned in the budget and the revised budget, that there will be no new Eurobond before year-end, and that next year two might be issued, or two different types of borrowing combined. The 2023 Eurobond, according to her, was issued at an interest rate above 6 percent. In January this year the state already borrowed one billion euros through a Eurobond in two tranches.

At the end of the second quarter, public debt stood at 58.8 percent of GDP, or about 10.7 billion euros. The Finance Ministry's own public debt management strategy projects 61.5 percent at the end of 2026, 61.8 percent in 2027 and 60.9 percent in 2028. That means three consecutive years above the 60 percent of GDP threshold.

Interest is growing faster than investment

According to government projections, 21.3 billion denars are set aside for interest in 2026, and in 2027 the sum rises to 24.4 billion denars, roughly 397 million euros. For comparison, around 43.6 billion denars are planned for capital investment in 2027. Interest alone will be more than half of all planned capital spending.

With the new revised budget for 2026, spending is 420.5 billion denars, and the deficit stays at 46.3 billion denars, or 4.1 percent of GDP. Most of the cuts fell on capital investment, almost 5.7 billion denars. The minister admits that some institutions will not carry out their projects because of failed tenders and delayed procedures.

Borrowing by itself is not a crisis - states routinely swap old debt for new. The problem starts when the deficit and interest grow at the same time, while the investment that is supposed to bring new growth gets cut or stuck in tenders. Then the new loan mostly serves to cover the old one, and development gets postponed to next year.

The citizens' bond will invite people to lend the state money for interest. The amount, the rate and the maturity are not yet known. Before anyone puts their savings in, they deserve an answer to a simple question: is this money for something that will outlast us - a hospital, a road, a school - or just to pay the next installment?