Caretaker Finance Minister Zdravko Maric said on Tuesday that a transaction to borrow money on the domestic market would be completed by the end of the week and that he expected the price of the issue to be lower than was the case at the start of the year.

Maric previously announced a new government bond issue on the domestic market for early July, saying that the transaction would be tied also to a structural repo auction of the central bank to enable primarily banks to participate in the bond issue.

"The process starts today and the transaction should be completed by the end of the week. I believe in the success of the transaction, but we'll see," Maric said ahead of a presentation of a survey on the transparency of local budgets.

The minister said that the price of the bond issue was a top priority and that he expected it to be lower than was the case with a borrowing at the start of the year.

In mid-March, the Finance Ministry issued the second tranche of bonds with the maturity date of 2026, amounting to HRK 4 billion, thus expanding a bond issue from December 2015. Owing to strong investor interest, which was two and a half times higher than the planned issue, bonds were issued at a price of 102.248%, with a 3.99% yield and the minimum premium of 2 basis points.

Maric also commented on the latest data from the central bank showing that public debt at the end of March totalled HRK 288.3 billion, 4.7 billion or 1.6% less than the year before. This was the first interannual drop in public debt since 1999.

He said that the decrease in public debt was owing to, among other things, positive exchange rate changes. Around three quarters of Croatia's public debt is denominated in a foreign currency, notably the euro, and over the past 12 months the kuna has appreciated mildly in relation to the euro and the US dollar, which has had a positive effect, said Maric.

"Be it as it may, this is a good indicator because for the first time since 1999 we have a nominal decrease in public debt and this government has set, as one of its priorities, which include employment and economic growth, a change in the course of public debt," said Maric.  

He said that the government had set this year's budget deficit at 2.6% of GDP and that if some other conditions regarding the budget were met, this year could see an annual decrease in public debt.

Asked if he expected problems in the autumn given that many government projects relied on putting state property into function and obtaining money from EU funds, which was currently on hold, Maric said that regardless of the fact that Croatia had a caretaker government and that an early election would be held, state institutions had to continue functioning.

As for EU funds, he said, "There is no alternative to that and we have to continue working so that all envisaged funds are absorbed by the end of the year, while at the same time work must continue on contracting funds for the coming years."

Asked about the cost of the election, Maric said that it would cost 120 million kuna, that the money was not envisaged in this year's budget but that it would be secured.

Regardless of the election, Maric said that the budget would be executed and that the deficit target would be achieved.

Asked if the budget would be revised, the minister answered in the negative.

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