BNB: Government deposits to decrease by 8% in 2013

The average annual amount of Government deposits at the Bulgarian National Bank (BNB) will decrease by about 8% in 2013, compared to this year, BNB predicted using a scenario for the estimated amount of foreign exchange reserves. The forecast is mainly a result of the payment of bonds (amounting to almost BGN 1.8 bn), maturing at the beginning of 2013, specified the Central Bank. The remaining positions on BNB’s balance sheet are expected to register moderate growth, which will offset the decline in the Government deposits and will contribute to the overall increase in the average annual amount of international foreign exchange reserves.

The financial market environment is formed under the influence of slower economic growth in the EU and the high level of uncertainty on financial markets connected with the ongoing debt crisis in some Eurozone countries. This results in a close to zero or even a negative market yield on short-term securities of the Eurozone countries with the lowest credit risk, in which BNB mainly invests. The aim is to guarantee the safety of foreign exchange reserves (e.g. the yield on German Government bonds will be negative over the next two years), commented the Central Bank.

Another low-risk instrument in which the BNB invests its forex reserves in order to ensure their safety are short-term deposits at banks. At the same time, the policy of historically low interest rates on the main refinancing operations and providing significant liquidity to the banking system, pursued by the European Central Bank (ECB), led to excessive liquidity and practically a zero interest on these deposits.

As a result of these factors, the effect of which is projected to continue in 2013 as well, the total return on investment is expected to be significantly lower than the average received by BNB in recent years.

Thus, the total yield of BNB’s assets in Euros for 2013 is projected at around 0.67% and the interest expenses on lucrative liabilities – to be practically zero. Proceeds from yields for the management of reserves will amount to about BGN 152 mln, or 98.7% of the estimated total amount of income from interest. Despite the ongoing crisis on the market, BNB is expected to generate a positive financial result in 2013, the Central Bank summarised.

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