The total volume of the foreign debt service of Slovakia ensuing from the official debt of the Slovak government and the National Bank of Slovakia (NBS) is $468 million in 1998, the daily news agency SITA reported. Of this sum, Slovakia has to repay approximately $50 million in principal and interest by the end of the year. In all probability, these payments will be covered from the official reserves of the state.
"I don't think it would be a problem to pay the $50 million by the end of the year, " said Ján Toth, an analyst with Tatra Banka. "It's too small amount, concerning foreign currency reserves, which represent about $3 billion."
However, Toth said that a larger problem existed in the impossibility of increasing state reserves. "The reserves cover less than is considered to be a safe level," he said, adding that if something happened and the NBS had to support the Slovak crown, "they could do only verbally rather than practically."
The total gross foreign indebtedness of Slovakia was $11.891 billion at the end of July. Of this, the debt of the Slovak government and the central bank was $2.275 billion. Apart from funds needed to finance debt servicing, Slovakia will need money for refinancing the state budget deficit, estimated at 17.5 to 21 billion Sk ($486 million to $583 million) in 1998.
Because 1.9 billion Sk in 28-day T-bills that will be later revolved have already been issued, the Finance Ministry still needs to issue at least 15.6 billion Sk in T-bills. The refinancing needs of the state budget will be also covered from two auctions of government securities scheduled for November 14 and 18. However, the volume of these issues is relatively insignificant, amounting to only 374 million Sk.
The total foreign debt servicing of the Slovak government could, according to SITA, amount to approximately 28.9 billion Sk ($803 million) in 1999, which is almost double the sum needed in 1998. The volume of the debt service will exceed 15% of state budget revenues next year. The biggest demand for funds will come in May, July, September and October .
"To relieve the domestic money market, the government will most probably borrow the money from foreign banks," expalined Toth, adding that Slovakia's coutry risk would make the loans very expensive. "However, the situation would change if Slovakia gets into the first group of the EU and OECD."
Pay-offs of coupons and capital yields of government securities amounting to 17.2 billion Sk and Eurobonds equaling 3 billion Sk will account for the biggest portion of the total debt service, SITA reported. The issue of 12 billion Sk of three-month T-bills, scheduled for November and December, will add another one billion Sk to the 20.2 billion Sk total, added the agency.
The state might also pay off approximately 75 billion Sk in principal and from state-provided guarantees to loans issued during the past 7-8 years, because some debtors will be unable to repay them. These state guarantees might deepen the debt service by 3 billion Sk in 1999.
"Here, what might be a problem is foreign loans guaranteed by the state," said Toth. "According to the NBS, 50 to 60% of corporate debt is based on these [foreign] loans, so these credits may put adverse pressure on state reserves."
