The Catalan government, which is currently immersed on a self-rule drive, will ask the central government to lend it 6.347 billion euros this year from the Regional Liquidity Fund (FLA), the region’s economic and financial commissioner, Andreu Mas-Colell said Thursday.
The FLA was set up in 2012 to help fund cash-strapped regions that have been cut off from the debt markets because of prohibitively high interest rates. However, since the fund was established, Spain’s borrowings cost have fallen notably.
Mas-Colell said of the 6.347 billion euros, 1.96 billion will go to cover the target deficit of the region for this year of 1 percent of regional GDP, with the remaining 4.387 billion to go to cover debt maturities. The amount Catalonia is seeking this year is down 41 percent on the 10.833 billion euros borrowed from the FLA last year when the region had higher debt maturities.
The FLA has been allocated 23 billion euros for this year, which means that the amount Catalonia is asking for will take up 27.6 percent of the total.
The average interest rate paid by regions on loans received from the FLA fell to 3.91 percent last year from 5.18 percent and is expected to be even lower this year, with Spain’s risk premium now below 200 basis points.
Mas-Colell has for some time been asking for the FLA to be made a permanent feature of the regional financing system.