Finmin says Croatia to half budget deficit in next two year

Finance Minister Martina Dalic has said that Croatia is entering a period of the reduction of fiscal imbalances and the country is expected to cut by half its budget gap in the next two years.

After her talks with World Bank and International Monetary Fund officials in Washington on the margins of the spring meetings of these two international financial institutions, Minister Dalic told Croatian reporters in Washington on Saturday that the medium-term trend of the fiscal policy, which was the topics of those talks, was based on measures Croatia had so far taken to control fiscal expenditure in accordance with the Law on Fiscal responsibility.

The law "clearly stipulates that the expenditure must go down in the coming period, resulting in reducing by half the state budget deficit in the coming two years," the Croatian minister said.

In 2010 this budget gap accounted for 4.7 percent of Gross Domestic Product and the country's external debt reached EUR 46 billion, according to the government's statistics.

As for the financial situation in Croatia, the budget deficit as the external debt are main problems which should be dealt with as quickly as possible, the minister added.

In mid-March Croatia government sold USD1.5 billion of notes in a US private placement market. The coupon rate of the notes is 6.375 percent and the yield is 6.617 percent. The maturity date of the notes is March 24, 2021.

Asked about plans for new borrowing, the minister said that the plans of that kinds would be carried out in the second half of this year as envisaged in the budget.

Dalic said she did not believe that the situation in the Croatian economy needed an intervention of the International Monetary Fund as "IMF funds are in function of strengthening foreign exchange holdings and those are not funds to finance the budget," she explained.

"Countries encountering problems with external liquidity conclude agreements with the IMF, and Croatia is not one of them," Dalic said.