In the second quarter of this year, the Czech Republic witnessed an increase in its foreign debt by CZK 28.1 billion, reaching a total of CZK 4.381 trillion. However, in comparison to the previous year, this reflected a decrease of CZK 249.8 billion. These findings were based on preliminary data recently released by the Czech National Bank (CNB).

As of the end of June, the foreign debt of the Czech Republic accounted for 61.6% of the country’s gross domestic product (GDP), which represents the total economic output of the nation.

Breaking down the composition of foreign debt, more than 77% of it was attributed to the private sector, with the remaining 22.6% comprised of liabilities of the public sector. The public sector’s obligations encompassed government sector debt, private entities guaranteed by the government, and entities with a majority state stake.

The CNB’s report highlighted that the second quarter saw an increase in the debt of both the government and banking sectors. The government sector’s foreign debt rose due to foreign investors purchasing government bonds, while the banking sector experienced growth in deposits received from abroad and an increase in the amount of bank bonds held by foreign lenders.

Consequently, during this period, the banking sector accounted for 39.3% of the total indebtedness, while the government sector made up 15.4%. Foreign liabilities of other sectors decreased, constituting 45.3% of the total debt.

In terms of the types of debt instruments, deposits and loans from affiliated entities were the most common forms of financing in foreign debt, collectively constituting 51.4% of foreign debt as of the end of June.

These figures illustrate the complex dynamics of the Czech Republic’s foreign debt landscape and its significant role in the country’s economic stability and growth.

Article by Prague Forum