When citizens invest in their city - Sabac the first to release municipal bonds thorugh public offer, Stara Pazova is getting ready as well

Source: eKapija Wednesday, 03.12.2014. 16:12
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The futureswimming pool in SabacThe futureswimming pool in Sabac

The City ofSabac is the first in Serbia to release municipal bonds through public offer.

This meansthat for the first time in Serbia, bonds of a local municipality will beavailable for purchase to all domestic and foreign entities and the city ofSabac will do it with the support of the Standing Conference of Towns andMunicipalities and Banca Intesa as the selected sponsor.

At last week’spresentation of the first public offer of municipal bonds in Serbia at theHyatt hotel, it was communicated the citizens will be able to invest theirsavings into a new financial instrument which is more than competitive to classicsavings in a bank.

All the interestedones, citizens of Serbia or other countries, physical or legal entities, willbe able to register municipal bonds. Assistant Secretary General at SCTM,Aleksandar Bucic, explained that when it comes to municipal bonds there is notax on profit from interest rate such as with savings and he value of a bond isRSD 10.000. He added the interest rate is significantly higher than the one forsavings since the rate possible now is 2% while bonds of the City of Sabac willhave an interest rate of 6% and the interest rate payment will start in equaltimeframe.

Maturity isseven years and grace period is two years. Starting as of tomorrow, December 4,2014, the citizens will be able to register and buy bonds at the Banca Intesa.If they are not purchased within the planned deadline, Banca Intesa will do itso the placement is fully guaranteed.

Bucic addedSabac is the first local self-governance which will collect financial assetsthis way for its projects and Stara Pazova will do it next year.

As he explained, all placed bonds so far, as well as the bonds of the City of Sabac are the result of the support which EU provides Serbia through IPA funds. Bonds preparation was implemented through the EU-funded Exchange program. Sabac opted for this move to fund the swimming pool construction.

Stara Pazova (Photo: Facebook)Stara Pazova

Stara Pazova is the next one

The firstnext local self-governance which will release bonds through public offer willbe Stara Pazova, The sponsor has already been selected and it will be UniCreditbank and as Bucic says for eKapija, terms which will be offered to investorsduring public offer have already been known.

Whichmunicipalities will be the next ones?

According toour collocutor, it is too early to speak about other candidates during 2015.

Whymunicipal bonds?

Aleksandar Bucic sees municipal bonds as one kind of potentially biggestmechanism fcor development of not only local self-governances but the entirecountry.


Aleksandar Bucic, speaking (Photo: SKGO)Aleksandar Bucic, speaking

Bucic explains that citizens, through investing in their savings, can earn even three times higher interest rate than classical savings interst rate in a bank that kind of earning is not taxed. Apart from that, as a result of that investment, citizens can improve their and their kids’ life quality since local self-governance can fund from these assest capital project only, it cannot use them for current expenditures.

On the other hand, as Bucic adds, we cannot neglect effects which development of municipal bnds market can have to the capital market in Serbia which has been suffering from the lack of new instruments for years which would be traded at the stock market. Even there, as he says, citizens could generate additional profit is trading with these bonds would be intensive and if the demand for them would be significant.

This means that at the side of investor, unlimited competition is formed which, in line with the rule, must lead to favorable terms for local self-governances.


Jelena Djelic

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