Spain paid 31.6 billion for debt interest due to the increase in rates

2023-09-29 08:30:45

The debt bill of the Spanish Administrations continues to grow at the same rate as public spending and the rise in interest rates. The latest update from the Debt Observatory of the Fiscal Authority (Airef) places the public hole at 111.2% of GDP in the second quarter of 2023, which represents a reduction of four tenths compared to the end of 2022. However In monetary terms, this debt continued to grow at a rate similar to that of nominal GDP, reaching 1,558 trillion euros in July. This has led Spain to be one of the EU countries with the highest levels of debt, only behind Greece and Italy.

The large volume of accumulated debt has the aggravating factor that the interest bill will not stop growing. Airef estimates that the average issuance rate will close 2023 slightly above 3% and will reach 3.4% in the coming years, which will boost interest spending to 2.9% of GDP in 2026. Already in 2022, The interest expense of the total Public Administrations increased by 5,550 million euros, up to a total of 31,595 million, which represents 2.3% of GDP. Therefore, interest expense in nominal terms has consolidated and accelerated the change in trend that began in 2021 after seven continuous years of reduction.

If the same implicit rate as in 2021 had been maintained in 2022 (1.9% versus 2.2%), the financial burden would have increased by only 1,576 million euros, which would be 3,974 million less. Much of this increase in the financial burden has occurred due to the revaluation of the debt portfolio linked to inflation, which has amounted to more than 8,000 million euros. If this revaluation due to inflation in 2021 and 2022 is excluded, interest expense would have continued to decline in 2022 as bonds issued with relatively high yields continued to be amortized, not far from those recorded throughout that year.

For its part, inflation-linked debt is slightly above 5% of the total portfolio, in line with that of other large European issuers. Beyond the recent conjunctural impact of the episode of high inflation on the financial burden, Airef points out that maintaining a debt program linked to inflation is a necessary asset for good diversification of the Treasury’s investment base, which has to cover certain needs. high financing.