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Exim Bank established to support Slovak exports

In its most visible move to jumpstart Slovak companies' flagging exports parliament in mid-February approved establishing Exim Bank, a bank devoted to financing mid and long-term export and import loans.
Prime Minister Vladimír Mečiar cabinet's idea to create the bank, with a basic capital of 10 billion Sk, comes as Slovakia's trade balance slipped 60 billion Sk in the red for 1996. "We approved 2 billion Sk from the state budget for the bank's basic equity and another 8 billion Sk from other parts of the state budget," said Ladislav Lysak, an economic specialist from the leading coalition party Movement for a Democratic Slovakia (HZDS). "This means that the bank will have everything necessary to be very active right from the start."
The bank, expected to start operating on July 1 according to the legislation, will support Slovak exporters' activities abroad, mainly in exporting machinery, finished products and complete production capabilities.


"The bank will have everything necessary to be very active right from the start."

Ladislav Lysák, HZDS economist



"The bank's primary activities are to help in areas where private resources don't exist."

B. Schmögnerová, SDĽ economist


In its most visible move to jumpstart Slovak companies' flagging exports parliament in mid-February approved establishing Exim Bank, a bank devoted to financing mid and long-term export and import loans.

Prime Minister Vladimír Mečiar cabinet's idea to create the bank, with a basic capital of 10 billion Sk, comes as Slovakia's trade balance slipped 60 billion Sk in the red for 1996. "We approved 2 billion Sk from the state budget for the bank's basic equity and another 8 billion Sk from other parts of the state budget," said Ladislav Lysak, an economic specialist from the leading coalition party Movement for a Democratic Slovakia (HZDS). "This means that the bank will have everything necessary to be very active right from the start."

The bank, expected to start operating on July 1 according to the legislation, will support Slovak exporters' activities abroad, mainly in exporting machinery, finished products and complete production capabilities.

Economic vice-premier Sergej Kozlík said it is critical for the state to support domestic firms' commercial activities abroad because mid and long-term export contracts face risks that they will not be honored, especially in cash-starved or politically unstable markets further east. These risks cannot be calculated in monetary terms, Kozlík argued, and it's the government's responsibility to cover these types of loans. Kozlík added that this was standard practice in other countries as well, especially Japan.

Cozy bank-state relationship

Deputies from non-coalition parties support Exim Bank in principle but say the government is focusing too heavily on loaning to companies to carry out projects abroad rather than supporting new products for export.

"Direct financing shouldn't be the bank's primary activity," said Brigita Schmögnerová, an economist with the Party of the Democratic Left (SDĽ). "The bank's primary activities are to help in areas where private resources don't exist, insure against various types of risks, and carry out other activities which support the state's export policy."

Schmögnerová also voiced disapproval with the fact that Exim Bank is outside all regulation in the commercial banking sector. "This situation creates the risk that the state's fiscal policy will be endangered and this law will contradict the National Bank [of Slovakia's] monetary policy, which will have severe repercussions on foreign currency policy," the SDĽ deputy said.

Lysák refuted that Exim Bank will present unfair competition to commercial bank loans, saying that the law supports mid-sized businesses, especially those which weren't able to procure loans because of high interest rates. And more importantly, Lysák said, the state is the loan's guarantor. "This is an absolute guarantee that will create advantageous conditions for Slovak subjects, similar to those in the OECD [Organization for Economic Cooperation and Development] countries," he said.

The cozy relationship between the state and Exim Bank, where the bank answers only to the government is what worries Viliam Vaškovič, an economist from the Democratic Union, the most. "The whole mechanism is left to cooperation between the bank and the government, where the government approves the bank's plans and how it operates," Vaškovič said. "I consider this to be a very unusual relationship which doesn't exist anywhere in the world."

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