East European Governments Increase Debt Issuance to Record Levels

East European Governments Increase Debt Issuance to Record Levels

Luka Petrović
2 min read

East European Governments Increase Debt Issuance to Record Levels

East European governments are facing mounting budget deficits and have resorted to issuing a record $36 billion in international bonds, led by Poland and Romania. Serbia has also joined this trend by introducing its first $1.5 billion sustainable note. However, the demand for these bonds is declining due to turbulence in emerging markets and a shift in global economic policies, resulting in delayed or limited rate cuts by major central banks. As a consequence, riskier assets such as emerging market debt are becoming less attractive, leading to higher borrowing costs. For example, Poland, the largest debt issuer in the region, is expected to experience a fiscal deficit of 5.4% of GDP, up from 5.1% in 2023, mainly due to increased defense and social spending. Interestingly, the Czech Republic stands out as the sole country in the region making significant fiscal adjustments, having reduced its deficit by 1 percentage point in the first four months of the year.

Key Takeaways

  • East European governments are increasing debt issuance to record levels, reaching $36 billion in international markets.
  • Poland and Romania lead in bond sales, with Serbia debuting a $1.5 billion sustainable note.
  • Rising borrowing costs and reduced demand due to global economic shifts challenge debt management.
  • Poland's fiscal deficit may widen to 5.4% of GDP, driven by defense and social spending.
  • The Czech Republic stands out by reducing its deficit, contrasting with fiscal pressures in Poland, Hungary, and Romania.


East European governments, especially Poland and Romania, are escalating debt issuance to unprecedented levels, driven by mounting budget deficits and increased spending on defense and social welfare. This trend, coupled with Serbia's entry into the market with a sustainable note, reflects a strategic shift to finance national priorities. However, global economic uncertainties and reduced central bank rate cuts are diminishing the appeal of emerging market debt, leading to higher borrowing costs. This scenario exacerbates fiscal challenges, with Poland's deficit potentially reaching 5.4% of GDP. Conversely, the Czech Republic's fiscal restraint offers a contrasting approach, highlighting divergent strategies within the region.

Did You Know?

  • Sustainable Note: This type of bond uses the proceeds to fund projects with environmental or social benefits. In the context of Serbia's $1.5 billion issuance, this reflects a commitment to sustainability and may attract investors interested in environmental, social, and governance (ESG) criteria.
  • Fiscal Deficit: It represents the difference between a government's total expenditures and the sum of its revenue and the money raised from debt instruments. A deficit of 5.4% of GDP (as projected for Poland) is substantial and indicates a significant gap between government spending and income, which must be financed through borrowing.
  • Emerging Market Debt: These are bonds issued by governments or corporations in developing countries. These assets are considered riskier than those from developed markets due to economic instability, political risk, and less developed financial systems. The reduced attractiveness and rising borrowing costs mentioned reflect increased investor caution and potentially higher interest rates on these bonds.

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