Gov't approves bond issue to cover deficit

The cabinet yesterday approved the Finance Ministry's plan to issue government bonds worth CZK 99.93 billion to cover part of this year's state budget deficit, according to information made public after the meeting of the cabinet on its website.

Prague, March 13 (CTK) - The Czech cabinet yesterday approved the Finance Ministry's plan to issue government bonds worth Kc99.93bn to cover part of this year's state budget deficit, according to information made public after the meeting of the cabinet on its website.

The law on the state bond programme to cover part of the budget deficit planned for the year 2013, approved by the ministers yesterday, enables maturity of the bonds of up to 55 years. A state budget with a Kc100bn deficit has been approved for this year.

"Every year, when the budget deficit is planned in the law on the state budget, the bill on the state bond programme to cover part of the planned budget gap is drafted and submitted. This happened also in the case of the state budget for 2013. The law is in fact formal," the Finance Ministry said in a report submitted along with the bill approved yesterday.

Under the law on the state budget, the budget deficit is financed through state bonds, loans from the European Investment Bank (EIB) and the change of the balance on the accounts of state financial assets.

This means that the law reckons with a further growth of the amount of accepted long-term loans to Kc1.63bn and a growth of the amount of money on the accounts of state financial assets to Kc1.56bn. The difference is then Kc67.1m.

"The amount, to which it is necessary to increase the amount of government bonds, is lower by this difference than the planned budget deficit," the Finance Ministry said in its proposal.

The proposed maximum maturity is necessary so that the ministry can offer investors government bonds in the full extent of available maturity periods of one to 50 years. This will enable the ministry to respond flexibly to the dynamically changing demand and a very unstable environment on financial markets.

"But government bond issues on the domestic and foreign markets in 2013 are mostly expected to have maturity of three to 15 years," the ministry said in its report.

The ministry also said that bonds with maturity of more than 15 years will be issued only in exceptional cases.

The Finance Ministry wants to borrow almost Kc231bn this year in line with the Funding and Debt Management Strategy for the year 2013.

It 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.

The cabinet yesterday also approved an amendment to the law on the State Agricultural and Food Inspection Authority (SZPI) which is to boost effectiveness of food control and consumer protection.

The amendment should, for example, enable the state to react faster to possible food crises such was the affair with bootleg spirits containing methanol.

Ministers also approved an amendment to the law against money laundering under which the head of the Finance Ministry's Financial Analytical Unit (FAU) is newly to be appointed by the government at the proposal of the Finance Minister.

The FAU should also newly be controlled by the Chamber of Deputies, that is the lower house of the parliament, and submit reports on its activities to the government and deputies.

The task of FAU is mainly to fight against money laundering and against the financing of terrorism.