Catalonia will ask the State for 8.538 billion and pushes back its return to the markets
The debt to the FLA up to 2016 has already been paid off and now the debts from 2017 onwards, totaling 75,398 million, remain outstanding with the State
BarcelonaThe Catalan government will request a total of €8.538 billion from the Regional Liquidity Fund (FLA), a similar amount to that requested in 2024 (€8.488 billion, of which it received €8.113 billion). This decision means moving away from resorting to the markets for financing again, as it had planned to do starting next year. to obtain around 5% of the total debtIn fact, the date has been repeatedly postponed, although the finances, still complicatedThey have been improving and the Catalan government has achieved for the first time in 13 years Financing from banks totaling 3.5 billionto lower the cost of the 2023 FLA (Regional Liquidity Fund). Agencies such as Fitch, Moody's, and DBRS have also removed the junk bond label from Catalan debt and given it a rating that considers it more reliable.
In presentations to investors, the Catalan government recently explained that debts up to 2016 corresponding to the State instruments for facilitating liquidity to the autonomous communities, which were implemented in 2012, have already been settled. Now, 2.7 million of the 90.7 billion in total liabilities existing as of June 30, according to data from the Bank of Spain, remain outstanding. The forecast is that there will be dependence on the State as a creditor until 2036. One of the documents delivered to analysts admits that "liquidity mechanisms continue to be the main component of Catalan debt, but their proportion has been reduced by 2025." The debt forgiveness agreement between the PSOE and ERC could reduce Catalonia's debt by around €17 billion and is currently up in the air. First, it must be approved in a second round by the Council of Ministers, and then it still has to go to the Congress, where everything is uncertain, given Junts' announcement of its withdrawal of support for the Spanish government.
Regarding the Regional Liquidity Fund (FLA) for 2026, of the total amount to be requested, €330 million is earmarked to cover the projected deficit target of 0.1% of GDP, €8.084 billion is to cover bond repayments, long-term loans, and the FLA itself, and the remaining €12 million is for other purposes. However, the total amount requested could be reduced depending on the amounts the Generalitat receives during 2026 from long-term loans it is negotiating with the European Investment Bank (EIB), as explained to analysts. This practice has the support of the Ministry of Finance. This year, the Generalitat has signed a €50 million loan agreement with the EIB, among others. In 2023, the Generalitat signed a €430 million loan agreement with the EIB, of which it received €180 million.
One of the factors that has led the Ministry of Economy, headed by Alícia Romero, to seek bank financing and explore other options is the increasing cost of the FLA (Regional Liquidity Fund). Although its debt-to-income ratio is decreasing, its cost is rising. This is demonstrated by the interest rate paid on the liabilities each year. The peak was 3.497% for the 2023 FLA, which is why bank financing was sought. This cost is significantly higher than that of the 2016 FLA debt (0.50%) or the lowest point, the 2021 FLA, at 0.109%. The forecast for 2025 is 3.031%.