(Adds details, context)
By Jason Hovet
PRAGUE, Dec 1 (Reuters) - The Czech Republic will tap
foreign debt markets for up to $3.7 billion in 2009 but will
take a cautious approach due to market uncertainty and investor
skittishness that has hammered emerging European bond markets.
The credit crunch has forced governments across the region
to scale back or scrap debt issues in the final months of the
year. Secondary markets have also seized up as investors hold on
to cash and avoid assets seen as more risky.
In its 2009 debt financing strategy released on Monday, the
Czech Finance Ministry said the crisis would make it hard to
predict demand and kept a flexible plan for rolling over its
88.2 billion Czech crowns ($4.36 billion) in debt coming due.
It said it would issue up to 132.6 billion crowns in medium-
and long-term government bonds next year, including 40 billion
to 125 billion crowns on local markets and up to 74.2 billion
crowns in foreign issues. It said foreign borrowing would make
up a maximum of 50 percent of its 2009 requirements.
"During 2009 the ministry will react very flexibly to
current developments... and will adjust the implementation of
the funding programme accordingly," the ministry said.
Also in the strategy, the Finance Ministry raised its 2008
state budget deficit forecast to 60 billion crowns, versus an
earlier estimate for a gap of around 50 billion.
MARKETS TIGHT
The Czechs last tapped international debt markets in the
first half of 2008 with a 2 billion euro, 10-year eurobond,
which secured a quarter of its borrowing needs.
Next year they plan at least one foreign issue but the
ministry said it would not attempt it in the very first months.
Analysts said the ministry's approach showed caution in a
time of deep uncertainty. Investors have dumped assets across
ex-communist Europe as governments there slash growth forecasts.
Central banks have pushed new measures to boost illiquid
markets, with Hungary buying back state bonds and the Czechs and
Poles introducing lending facilities that take state papers as
collateral. Hungary will issue its 2009 debt plan on Dec. 10.
And on Sunday, Poland announced an anti-crisis package worth
91.3 billion zlotys ($31.40 billion), largely devoted to
boosting liquidity in its debt markets.
"The Czech bond market has been affected in recent months,
but to a lesser extent than Poland or Hungary... so a cautious
approach to issuances is advisable, and I assume they can afford
it," said ING emerging Europe economist Agata Urbanska. She
added it was difficult to say when market conditions would ease.
The Czech Finance Ministry also released a new monthly
issuance plan for January, instead of a quarterly plan as in the
past, with an auction for a new 8-year, floating rate bond and
issues of up to 12 billion crowns worth of treasury bills.
The Czechs count on a 2009 budget gap of 38.1 billion crowns
but the plan was drawn up in the summer with a forecast 4.8
percent growth. The ministry has since cut that to 3.7 percent.
The new floating rate bond has met steady interest from
investors, but demand on secondary markets remains thin.
"I hope gradually we will get back to a normal situation and
spreads will be tighter, while markets will be more liquid, and
investors will be more inclined to buying," said a domestic fund
manager who did not want to be named.
(Reporting by Jason Hovet and Jana Mlcochova, Editing by Andy
Bruce)
