In order to actively manage the public debt portfolio and protect it against various forms of financial risks, as well as to reduce further borrowing costs, the Republic of Serbia took advantage of attractive financial market conditions, favorable exchange rate of the Euro and Chinese Yuan, as well as the current divergence between interest rates in euros and yuan for the realization of a swap transaction related to a loan with Export - Import Bank of China for the project of building a bypass around Belgrade on the highway E70 / E75, which was in 2018 initially contracted in Chinese Yuan.
The before mentioned loan, on which a fixed interest rate of 2.50% per annum in Chinese yuan was paid, was converted into euros at a fixed negative interest rate of -0.07%. As the negative interest rate has been agreed, the Republic of Serbia will not have any interest expenses in the first 5 years of the swap arrangement, which is valid until 2030, but will receive additional income from the banks with which the transaction was concluded. Thanks to that, savings in the budget of about 35.6 million euros will be realized during the duration of the arrangement. Also, the exposure of the public debt portfolio to the movement of the original currency of the loan, the Chinese Yuan, is decreasing in the forthcoming period. The transaction was performed in accordance with ISDA (International Swaps and Derivatives Association) standards.
The Ministry of Finance of the Republic of Serbia will continue to monitor developments in the international financial market and act proactively in order to minimize the risks posed by debt contracted in foreign currency and reduce interest costs based on obligations already contracted. Thanks to active public debt management in the previous period, the weighted average interest rate was reduced from 5.70% at the end of 2014 to 2.91% at the end of 2020.