SPP money goes to domestic debt

CONTRARY to the suggestions of the IMF and the National Bank of Slovakia (NBS), the government has decided to use privatisation proceeds from the sale of a minority stake in the SPP gas utility to pay down domestic rather than foreign debt.

On May 29, the government approved a plan to use Sk50 billion from the SPP sale to pay down its domestic debt, which is expected to grow by Sk47.5 billion this year. The Ministry of Finance expects that total state debts will reach Sk448 billion by the end of the year, of which Sk51.9 billion will mature in the second half of 2002.

The NBS said that it respected the ministry's decision to reduce domestic debt, but emphasized that retiring foreign debts would be a better solution. The central bank noted that the amount of payable foreign debts will reach 1 billion German marks, on top of $300 million due next year.

Considering the likelihood of a growth in global interest rates next year, the cost of foreign credit will become higher, warned the NBS.

"The need to sterilize excess funds resulting from the repayment of the domestic debt will deepen the loss of the central bank by Sk2.4 billion annually," the NBS warns. The bank's opinion is backed by the IMF, which also recommends placing emphasis on retiring external rather than domestic debt.

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