ZAGREB, March 2, 2018 – Croatia’s public debt in November 2017 went up 3.7% on the year to 300.2 billion kuna, which was its highest nominal level to date, but the Croatian Chamber of Commerce (HGK) analysts say the public debt trends remain favourable as the government’s financing needs are decreasing.
Aside from increasing 10.5 billion kuna annually, last November the public debt increased monthly as well, by 3.2% (9.3 billion kuna), according to recently released central bank figures.
An HGK analysis shows that last November the government borrowed domestically and abroad, with a 5.8 billion kuna bond issued on the domestic market, at 1.75% interest and due in 2023. A bond worth 1.275 billion euro was issued on the foreign market, at 2.75% interest and due in 2030.
The funds obtained from those bond issues were used to pay a due domestic bond and the debts of the HAC and ARZ motorway operators and the HC road operator.
In 2017, the public debt trends reflected the positive impact of a budget deficit decrease and a budget surplus, which reduced the need to borrow, and the continuation of historically low interest rates on the domestic and foreign markets, which provided for a more favourable government debt refinancing.
Last year, in order to refinance debts, the government turned more to the domestic market, the HGK analysis shows. Consequently, the internal debt increased by 6.3 billion kuna and the foreign debt by 4.2 billion kuna.
It is estimated that the public debt to GDP ratio at the end of 2017 was about 80%, down from 84% at the end of 2016. This means the ratio is decreasing at a pace which meets European Commission criteria, that it has a positive impact on the sovereign credit rating, and that it backs the country’s intention and readiness to enter the European Union’s Exchange Rate Mechanism (ERM II) with a view to introducing the euro, the HGK says.