NBP grants government $2.14 billion loan for Brazil debt repayment

The National Bank of Poland (NBP) will grant the government a $2.14 billion loan for the early repayment of a $3.3 billion debt to Brazil. In return the bank will receive from the government two-year Treasury bonds. The remaining money will be taken from the Finance Ministry's hard currency account. According to Finance Minister Marek Belka, the government will pay back the bonds to the NBP mainly from privatization revenues, and possibly from a Eurobond issue. The Central Bank and the Ministry agreed the deal as a way of smoothing out Poland's debt servicing schedule and achieving the target of a 12% reduction in the country's external debt, which currently stands at some $27 billion. The debt to Brazil stems from export loans granted in the 1970s, and was to be repaid by 2009. Early repayment entitles Poland to a hefty discount. Central Bank governor Leszek Balcerowicz told a news conference, "This is a great investment for Poland, which decreases its foreign debt." He added that the deal would save Poland some $860 million in capital payments. (Gazeta Wyborcza, p. 27; Reuters) P.J.