The Slovak government is prepared to raise taxes and cut expenditures in order to meet its budget deficit target for 1999, Deputy Prime Minister for Economy Ivan Mikloš said at the World Economic Forum in Davos, Switzerland on February 1.
Mikloš also said the government is considering the possibility of selling its stake in Československá Obchodní Banka (ČSOB) to the European Bank for Reconstruction and Development or the International Finance Corporation, the private financing arm of the World Bank.
However, he said the government would prefer to sell its 24% stake in ČSOB to the same foreign buyer that acquires the Czech government's 66% stake.
During a visit to Bratislava in the last week of January, officials from the International Monetary Fund expressed doubts that the government could cut its budget deficit to 2% of gross domestic product from roughly 6% last year.
Mikloš said the government had agreed with the Fund to cut the deficit to a third of its 1998 level, and said it would take some of the Fund's recommendations on board.
In particular, Mikloš said the government would change its value added tax rates, initially raising the lower, 6% rate to between 10% and 12%. One or two years later it will lower its upper, 23% rate. "We also had some doubts whether the measures approved were sufficient," Mikloš said. "We are thinking of adding other measures, some mentioned by the IMF."
Mikloš said it's necessary to cut the budget deficit in order to narrow the current account deficit to between 5% and 6% of GDP this year from 11% last year. Slovakia has run high current account deficits for a number of years, fueling an accumulation of short-term foreign debt that analysts believe needs to be reduced quickly.