Slovak Finance Minister Brigita Schmögnerová said on April 18 that short-term company debt backed by the government could put fresh strain on 1999 spending as ministers seek to slash the budget deficit to half of 1998 levels.
Schmögnerová told Reuters in an interview that many short-term, government-backed credits taken by companies for investment should be repaid this year and in 2000.
"This is private debt but part of this private debt is government-guaranteed. It could have a direct implication for the state budget," Schmögnerová said during the annual meeting of the European Bank for Reconstruction and Development (EBRD), which she was attending in London.
She said four billion Slovak crowns ($100 million) for this purpose had been set aside in the 1999 budget. "There is some risk that this could be even higher. I am much more concerned about this than about any other thing," Schmögnerová said.
The Slovak parliament passed the budget, which foresees a deficit of 15 billion crowns, or two percent of GDP, on revenues of 179.9 billion crowns and expenditures of 194.9 billion.
The four-party reform-minded coalition government, which took power after a September election, has pledged to cut the deficit to two percent of gross domestic product from more than five percent last year. However, some critics have questioned how realistic this is.
Deputy Prime Minister Ivan Mikloš said in mid-April that the plan was less likely to be met after the government failed to raise the lower limit of value added tax or impose an import surcharge.
Instead, the government decided to raise excise duty on tobacco and fuel, impose a road tax and cut the number of civil servants, Schmögnerová said. "Hopefully these measures will prove to be enough for keeping the target," she said, adding the government had decided to restrict spending in the first half of this year to 46% of the total instead of 50%.
The government has also pledged to keep unemployment at less than 15% and inflation under 10%. Inflation was running at 7.0% year-on-year in March, but the 10% target would allow for further rises in regulated prices, Schmögnerová said. "We should do these increases in such a way that these targets still could be reached," she said.
Schmögnerová said the government was sticking to its forecast of three percent GDP growth this year, compared with 4.4% last year and 6.5% in 1997. "Up to now I think it is too preliminary to make any corrections," she said, adding that the first quarter would be relatively weak as some infrastructure investment had been slowed.
Author: Nigel Stephenson
