MPs okay bonds worth CZK 153bn to cover budget gap

Prague, Feb 5 (CTK) - The Chamber of Deputies Friday passed a bill for the issue of state bonds worth Kc153.2bn to cover this year's state budget deficit planned at nearly Kc163bn.

The bill is yet to be passed by the Senate and signed by the head of state.

"It is a traditional and standard procedure used to reduce the refinancing risk," Finance Minister Eduard Janota said.

The difference between the deficit and the bonds will also be covered by accepted loans and higher surpluses on the accounts of state financial assets, according to Janota.

The lower house Friday also passed a bill to issue bonds worth Kc14bn to cover last year's budget deficit, which rose from the planned Kc38bn to Kc192bn owing to the crisis and a fall in revenues.

The state will issue bonds worth Kc167bn in total to cover both the deficits. When asked by CTK, Janota confirmed that it is a record-high amount.

Janota said the state will this year issue bonds worth a total of Kc290bn as it also needs to finance older debts which are to be repaid this year. It raises the money for their repayment from the sale of new bonds.

"It is sad, but that's the truth," he said.

Janota welcomed Friday's decision of deputies.

"This gives me a certainty of reasonable financing this year," he told reporters.

Janota is not afraid at the moment that the state would fail to sell the bonds.

"We do not have any signals that there would not be interest in the Czech Republic's bonds," he added.

Under the bill, the decision to issue the bonds would be made by the Finance Ministry. The amount of bonds issue would increase the state debt. According to Janota, the state debt should climb up to nearly Kc1,338bn at the end of the year, and interests on the debt should grow to about Kc65bn.

Last year, the Czech state debt increased by nearly Kc179bn to Kc1,178bn, which is over Kc112,00 per head. In 2008 the state debt rose by Kc107bn.