FinMin: State debt to grow to CZK 1,734bn in 2013

Prague, Sept 10 (CTK) - The Czech Republic's state debt will grow to Kc1,635bn at the end of 2012, and next year it should rise by another Kc99bn to Kc1,734bn, according to the Finance Ministry's draft budget proposal available at the government's website.

At the end of 2011, the state debt amounted to Kc1,500bn.

The government is to start to discuss the draft budget for 2013 on Wednesday. The final draft has to be sent to the Chamber of Deputies by the end of September.

The state budget deficit for next year is envisaged to amount to Kc100bn. The budget nevertheless reckons with a change in tax laws including a VAT rise by 1 percentage point.

The Czech government coalition did not, however, override the Senate's veto on a stabilisation package with an VAT increase because six MPs for the Civic Democrats (ODS) rejected it in a vote taken by the Chamber of Deputies last week.

The Finance Ministry's plan for next year reckons with total budget expenditures worth Kc1,185bn and revenues worth Kc1,085bn.

This year's expenditures are planned to reach almost Kc1,190bn.

The Finance Ministry's plan also reckons with gross borrowing need of Kc238.8bn for next year.

This year the ministry wants to borrow over Kc243bn. Bonds are to be used for Kc137.2bn repayment of state debt and to cover the Kc100bn deficit.

The ministry plans to issue bonds worth Kc136.6bn next year, saving retail bonds worth Kc20bn and foreign bonds worth more than Kc50bn.

Furthermore, the Finance Ministry wants to finance the state debt through a net rise of issued state treasury bills by Kc30.1bn. In addition, it intends to borrow Kc1.6bn from the European Investment Bank (EIB).

According to Prime Minister Petr Necas (ODS), disputes over the future VAT rate are enhancing the threat of a stopgap budget. The government has decided to submit the proposal again but to link it with a confidence vote.

State debt

2005 2006 2007 2008 2009 2010 2011 2012 expectation 2013 expectation
State debt at year's end in Kc bn 691.2 802.5 892.3 999.8 1,178.2 1,344.1 1,499.4 1,635 1,734.3
Share of state debt in GDP % 22.2 23.9 24.4 26 31.5 35.6 39.4 42.5 44.2

Source: draft state budget for 2013