ZAGREB, July 24, 2020 – The government on Friday sent to parliament for ratification three loan agreements with international financial institutions worth €660 million to respond to the crisis caused by the COVID-19 pandemic, for post-earthquake reconstruction and for strengthening healthcare.
One agreement refers to a €275.9 million World Bank loan for crisis response and recovery support and another for a €183.9 million World Bank loan for post-earthquake reconstruction in the Zagreb area and for strengthening public health preparedness.
In early June, the government endorsed reports on negotiations on the two agreements, which were approved by the World Bank Board of Executive Directors at the end of June and signed at the beginning of this month.
Finance Minister Zdravko Maric said at a cabinet meeting that the repayment period for both loans was 14 and a half years with five years’ grace and a variable interest rate tied to six-month Euribor plus 0.75% of the fixed interest margin.
The €183.9 million loan envisages the establishment of institutional and coordination capacities for planning and implementing the reconstruction of public buildings damaged in the earthquake, facilitating the restoration of key healthcare and education services after the earthquake, and improving the public health sector’s preparedness for communicable diseases in the future, Maric said.
The government also sent to parliament for ratification a €200 million loan agreement from the Council of Europe Development Bank.
Maric said the repayment period was 12 years with three years’ grace and a fixed interest of 0.24% or a variable interest rate based on six-month Euribor plus 0.36% of the fixed interest margin.
He said the loan would be used to reduce the contagion and effects of the pandemic and ensure the availability of medical services and supplies as well as drugs and protective equipment, among other things.
Croatian companies could receive €800m from Pan-European Guarantee Fund
The government also decided to initiate the signing of a contribution agreement with the European Investment Bank on the Pan-European Guarantee Fund in response to COVID-19.
The fund is part of the €540 million packages agreed by the European Council to help businesses, together with the SURE programme to help workers and the European Stabilisation Mechanism to help states, said Maric.
The aim of the fund is to ensure liquidity so that eligible businesses, notably SMEs, can deal with the crisis and continue to develop in the medium and long terms.
The target value of the fund is €25 billion and it is formed on the basis of member states’ guarantees, while short term liquidity is ensured by the European Investment Bank. These guarantees cover losses and operating expenses, said Maric.
It is estimated that the fund will mobilise €200 billion in additional investment.
Maric said Croatia’s contribution to the fund would be €106.7 million and that Croatian companies, notably SMEs, could receive €800 million from it, depending on the absorption by other member sates.
“Participation in the fund will give the economy, notably small and medium-sized enterprises which have been significantly affected by the crisis, access to additional capacities of the EIB group as part of emergency financial aid in the pandemic.”