France keeps 2021 bond issuance steady despite higher deficit

PARIS: France will tap cash on hand at the Treasury rather than issue more debt to cover a higher than previously expected deficit, the Agence France Tresor public debt agency said on Wednesday.

AFT said in an update on its issuance plans that it intended to issue 260 billion euros ($317 billion) in medium and long-term bonds this year, unchanged from a previous estimate and how much was issued last year. Short-term T-bill issuance would also be kept as planned.

It said it would keep debt issuance steady even though government is to submit a revised budget bill to parliament later on Wednesday that foresees a deficit of 220 billion euros, compared with the 173 billion expected previously.

The bigger deficit is in large part due to the carrying over of undisbursed budget credits from 2020 into this year, and 15 billion in new emergency spending related to the coronavirus crisis, the finance ministry said earlier.

AFT said that it would cover the increased financing needs by drawing down 47.8 billion euros on the Treasury account, which saw a 63.4 billion euro increase in its cash balance last year because the 2020 deficit was smaller than budgeted.

In recent years, the government has required a number of public bodies and institutions to keep cash reserves at the Treasury, reducing its need to tap the debt market.