The European Investment Bank (EIB) will provide a 200 million ECU loan to Slovakia this year, aimed mainly at refinancing debts for Slovak railway transport, the Finance Ministry said on February 23.
"The loan should be the first part of a wider investment programme of the EIB in Slovakia," Finance Ministry spokesman Peter Švec said.
He said other tranches, which have not been yet specified, would be aimed more at financing Slovakia's highway construction programme.
The EIB loan comes on the heels of a meeting between Slovak Deputy Prime Minister for European Integration Pavel Hamžik and EIB Vice President Wolfgang Roth in Bratislava on February 19. On the same day, Roth announced that the EIB would make 400 million ECU available to Slovakia over the next 18 months.
"The bulk of EIB funding will go into projects designed to expand existing rail and road infrastructure on international routes, but there will also be money to develop air and water transportation and telecommunications," reported Hamzik after the meeting.
Roth explained that the loans were a sign of confidence in the new cabinet's policies. "Your new government is already getting good recognition in the financial milieu, yet now it is time to show it can fix economic problems," he said. "Its starting-point visions have been accepted and labeled as quality. It is also important to see what plans your cabinet has with the state budget."
This is not the first time the EIB has extended loans to Slovakia. It lent the country 100 million ECU back in 1996 to upgrade the power industry, and was back the next year to finance a phone network overhaul for state telecom giant Slovenské Telekomunikácie Bratislava.
In 1997, EIB teamed up with the European Union's PHARE project to provide 72 million ECU for highway construction. Another 65 million ECU was secured by mobile phone operator Globtel GSM Bratislava to expand its network. Last year, the EIB provided another 51 million ECU to help build a combined steam and gas heating and power station in Bratislava.
To date, the EIB has lent 665 million ECU to Slovakia.
"Since the EIB's loans are roughly 10% cheaper than funds on capital markets, governments in transforming countries might want to find a fitting model for combining both fund-raising alternatives," Roth explained, adding that the one catch with EIB loans was that they were denominated in hard currencies, leaving borrowers vulnerable to the risk of conversion-related losses.
Finance Ministry spokesman Švec said the latest loan had a maturity of at least five years, adding that he could not yet specify the rate of interest and other loan conditions.