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Photograph: Freeimages.com/Aneta Blaszczyk

Croatia will borrow on the domestic market in July as it needs to refinance a bond maturing in the second half of July, an unnamed government source told Reuters on Thursday.

"We've yet to define the details, but it will be a bond denominated in the national kuna currency. We will know more details at the beginning of July," the source was quoted as saying.

A bond worth 3.5 billion kuna matures on July 22.

Due to a higher risk premium, earlier this month Croatia decided to postpone a Eurobond issue on the international markets, tentatively worth around one billion euros amid domestic political instability which ended with the government's downfall.

In August Croatia has to refinance 18-month treasury bills worth 1.25 billion euros.

"It will be a separate operation, unrelated to the July bond," the source said.

Excluding the treasury bills, this year Croatia needs some 27 billion kuna just for refinancing maturing bonds and covering the budget gap, Reuters said.

Next year is financially very demanding as Croatia which will need almost 30 billion kuna just for refinancing bonds and interest payments.

A snap election is expected to take place in the first half of September. Unless a new government puts forward a convincing reformist plan, needed to pursue decisive fiscal consolidation, reduce high public debt, improve the investment climate and spur growth, Croatia is likely to face severe difficulties in servicing its financial obligations at a favourable price, Reuters said.

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