Gov't approves issuance of bonds worth almost CZK 157bn

Prague, Feb 13 (CTK) - The Czech government yesterday approved the Finance Ministry's proposal to issue bonds worth almost Kc157bn this year, with the ministry planning to use Kc7.8bn of the amount to cover part of the deficit of the state budget for 2011, the government's spokesman Michal Schuster said.

The ministry also wants to use the money raised from the bond issue to cover securities maturing this year and for the repurchase of further bonds from the market.

The main reason for submitting the proposal is the repayment of a higher state budget deficit in 2011 and an effort to avoid the refinancing risk, that is the possibility that the state would not be able to meet its obligations due to a small share of long-term government bonds, the ministry said.

The Czech state posted a Kc142.8bn deficit in 2011. Originally, the ministry reckoned with a deficit of Kc135bn.

The Finance Ministry obtained money for covering the originally planned deficit thanks to another law on the state bond programme. The ministry submitted the current law owing to the extra amount of almost Kc8bn.

The ministry can use the remaining sum of over Kc149bn to cover state debt principals payable in 2013 and other possible obligations of the state due in 2013, according to the proposal.

"The bond issuance will increase the state debt by the nominal value of the bonds, but the use of the money raised from their sale for instalments and repurchases will in turn cut the state debt," the Finance Ministry said.

The state debt amounted to Kc1,670bn at the end of 2012.

The law on the state bond programme to cover part of the deficit of the Czech Republic's state budget for the year 2011 exceeding the planned deficit and on the state bond programme to cover the state's other obligations payable in 2013 enables bond maturity of up to 105 years.

The Finance Ministry wants to borrow Kc230.7bn this year in line with the Funding and Debt Management Strategy for the year 2013.

The ministry is planning to issue government savings bonds again next year as part of the strategy. The value of the savings bonds, intended for individuals, municipalities, foundations and non-profit organisations, will be between Kc20bn and Kc40bn.