Linić: The IMF is already here, but there is no need for a new arrangement

The upcoming year 2013 will not be problematic for borrowing, the Croatian Government will be able to implement a borrowing program of around 28 billion kuna, which are obligations, said today Finance Minister Slavko Linić.

Most of this will be from the domestic market and the planned issuance of government bonds for the first quarter will not be realized because there is no need to undermine the value of our bonds on the foreign market, and at this moment there is also no need for borrowing from the IMF for 2013, the minister said.
Linić made this statement in response to journalists’ questions related to last night’s statements by the governor of the Croatian National Bank (HNB), the decline in credit rating, borrowing possibilities, potential engagement with the IMF, and other current issues, after signing a loan agreement with the EBRD and guarantees for that loan to finance the infrastructure renewal project of the Port of Split.

Emphasizing that we will, if necessary, borrow credit next year, possibly on foreign markets, Linić also stated that he cannot know what will happen by the end of next year, discussions will continue on this, including with the HNB, but that neither the exchange rate nor liquidity is endangered in all of this.

It is evident that we will have somewhat higher interest rates in monitoring liquidity, in investments, but Linić does not expect a significant rise in interest rates. The Finance Minister believes that borrowing from the IMF for 2013 or entering into credit arrangements is not necessary for now, and if the need arises, but he does not believe it will be for 2013, discussions will be held directly with the IMF.

He recalled 2003 when the ‘stand by’ arrangement with the IMF was concluded at a time when we were starting to enter foreign markets, then someone needed to assess the situation in Croatia and the Government’s program. This was the reason we concluded the ‘stand by’ arrangement with the IMF at that time, and today everything is known about Croatia, we have regular monitoring of the credit rating and assessments of the work of the Croatian Government by agencies, as well as critical assessments from the Croatian public, and we have a Government that must clearly state what the reform and fiscal austerity programs are for 2013.

He also noted that the IMF is present in Croatia, having given its assessment of the budget and borrowing two months ago, and that the Government should be more vigorous and further reduce expenditures for the pension system. We can talk about whether we will conclude some arrangement with the IMF, not whether the IMF will come or not and whether it is present or not, because it is already here, and we discuss government policies with it twice a year, said Linić.

He reiterated that we do not need any new arrangement or IMF money for now. When asked about the possible issuance of domestic bonds, Linić said that this is now being considered even more intensively because we want to remain in the domestic market, citizens have some savings, and if they show interest, they will turn to that, as well as to pension funds.

Regarding the budget and whether and where there will be new cuts, Minister Linić said that this should be left to the narrower cabinet of the Government and the Prime Minister to assess whether something will be done due to the credit rating in the first quarter. He personally believes that we in Croatia are so critical and unambitious that we consider the Government’s projection of a growth rate of 1.8 percent unrealistic.

There is no problem cutting investments in the budget, we will have lower growth, a lower share of public finances, we will also reduce the deficit, and then everyone will probably be satisfied, he said, adding that it turns out that those in the Government are illiterate and unprofessional as they see growth that others do not see.

Conversely, everyone believes that there should be no growth in the public sector, there are debates on this, but the problems in the economy that need to be financially consolidated are evident, and this first concerns the private sector, warned Linić.

In response to messages from HUP and Mudrinić that they will help the Government, Linić says ‘yes, they can’, but also emphasizes that first the problems of the private sector, which has not resolved its finances at all and reacts too slowly to government actions, need to be addressed.