The International Monetary Fund's (IMF) description of the situation in Croatia regarding the growing public debt is worrying, which is why it is necessary to continue with austerity measures and cutbacks to ensure economic growth, Finance Minister Slavko Linic said on Thursday in his comment on the concluding statement of an International Monetary Fund mission after visiting Croatia.
As for the Fund's statement that Croatia's public debt is rising fast, Linic said that the debt was on the rise given that the incumbent government had finally established figures regarding liabilities in the shipbuilding industry, public health sector, rail infrastructure and in other sectors.
Despite its success in controlling the budget deficit the government has taken over problematic loans which is why the public debt is rising, Linic explained.
Linic is certain that in 2013 and the years to come it would be necessary to continue with financial consolidation and to control the deficit.
The government's finds that cutbacks are necessary and it is also necessary to fight for economic growth, given that it would be difficult to cut public expenditures without growth, the minister said.
Asked whether the government was considering the option of raising the Value Added Tax zero rate on certain products to 10% as recommended by the IMF, he recalled that the VAT zero rate would be converted to the five-percent rate as of 1 January 2013, and "there is no need therefore for the time being to change that".
The government believes that it can achieve a growth of 1.7% in 2013, and the first and the second quarter next year will show whether the government's projections were realistic, he added.
Asked to comment on the draft monitoring report from the European Commission which reads that the government has not done enough in the shipbuilding and steel industry, the minister recalled that the Sisak steel mill was currently shut down and that its new owner could restart production by the end of this year.
As for the shipbuilding sector, Linic said that the government had taken over more than HRK 9 billion of the sector's debt to roll over to the public debt.
The Kraljevica shipyard has filed for bankruptcy, Uljanik is completing its privatisation and the Rijeka-based 3. Maj is about to be privatised, signing of a privatisation contract for Brodosplit is expected in the next seven or eight days, and it remains to be seen what will be with Brodotrogir.
"Thus, all obligations from the Competition Policy will be met until Croatia's entry into the EU", the minister said.
