The Generalitat plans to finance part of its debt in the markets next year.

BarcelonaFirst it was in 2023, then in 2024, and then in 2025. And now next year, in 2026. The Generalitat (Catalan government) plans to finance at least 5% of its debt in the markets starting next year. A sign that this could become possible, unlike in 2012, when the autonomous regions had to turn to the state through various instruments such as the regional liquidity fund (FLA), is the agreement by which the major banks are once again supporting the Catalan government after thirteen years. This is provided there are no elections beforehand, since the current budget is for 2023 and has been extended since then.

Last week, it was announced that six institutions, including CaixaBank, Banco Sabadell, BBVA, and Santander, have approved loans to refinance €3.5 billion of the 2023 FLA at a lower cost. The forecast is that, thanks to this measure, the Generalitat will achieve interest savings of 127.6 million over eleven years. For the Catalan government, this agreement represents a return to the confidence of the private sector, which had not financed the Generalitat's long-term debt since 2012.

Another important element in being able to turn to the markets is the forgiveness of part of the debt with the FLA, approved by the Spanish government, which in the case of Catalonia amounts to 17.104 billion euros, but must be ratified by Congress. If it goes ahead, it could improve the Generalitat's solvency rating.

The goal is for Catalonia to meet the necessary requirements for a gradual entry into the markets: next year it would represent 5% of all debt; in 2027, 10%; in 2028, 15%; and in 2029, 20%. In any case, due to the high volume of the Generalitat's financing needs, it will have to continue relying heavily on access to liquidity mechanisms such as the FLA. According to government forecasts, this will continue until at least 2036. Total debt was €89.7 billion on March 31, of which more than 80% is owed to the State.

Bond Issues

Until the markets closed thirteen years ago, the Catalan government had even resorted to bond issues for individuals and businesses. Through the extraordinary mechanisms intended for the autonomous regions, in 2014 the Treasury liquidated the last of the Generalitat's bond issues intended for individuals and businesses. They totaled 781.5 million euros for two years at 5%, with quarterly settlement of interest accrued by 32,605 investors. This amortization brought to an end the cycle of financing through the so-called good patriotic, which began the tripartite government in 2010.

The former CiU had previously used this system: from 2011 until the markets closed. The issues, which paid very high interest rates of up to more than 5%, had to be repaid through the FLA. From 2010 to May 2012, when the last issue was made, the total amount raised by the Generalitat through bonds destined for individuals and companies reached 12,726.5 million.

This type of placement was first introduced by Jordi Pujol's government in the 1980s. The first was in 1981 for around 60 million (10 billion pesetas at the time) for four years at 11.75%. The following were in 1983 for 10 billion pesetas over four years at 14%; in 1985 for 4.242 billion pesetas (25.5 million euros) over one year at 11.75%; and in 1986 for 20.4 million euros at 9.50% interest every six months.

The Catalan government plans a gradual reduction in the debt-to-gross domestic product (GDP) ratio, which will reach 26.5% of GDP in 2026, down to the 24% expected in 2029. These figures do not include the commitment to forgive 20% of the FLA.