Thu. Feb 22nd, 2024

Inflation will force the country to spend an additional €14 billion to service government loans

Servicing government loans in 2023 will cost Germany nearly twice as much as it currently spends due to soaring inflation, German media group Redaktionsnetzwerk Deutschland (RND) reported on Friday, citing documents from the country’s finance ministry on next year’s budget.

According to the report, due to a miscalculation in the inflation forecasts of previous governments, Germany’s interest payments on its public debt will increase from €16 billion ($16.09bn) to almost €30 billion next year, as the federal government has been issuing bonds that are linked to the inflation rate in recent years. The news outlet states that Berlin underestimated the risk of inflation growth, and as a result, it now faces the need to provide much larger sums to service these bonds.

According to the documents for the draft budget for 2023, around €7.6 billion must be reserved for the repayment of so-called inflation-linked bonds in the coming year. This is €3 billion euros more than this year and almost €7 billion more than last year, when inflation was still low,” RND reports.

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