Again, by creditorcategory the commercial banks have the largest exposure. Within the commercial claims, it is surprising that up to 1989 a larger amount is ST thanMLT. This pattern does not hold when the overall hard currency indebtedness is taken into account.

Debt increased again in the second half of 1990 as<sup>a</sup> result of net new medium and long tern borrowing plus substantial valuation effects. Short term debt continued to decrease throughout the second half of 1990 in _spite of administrative measures introduced in October to restrict cash payments for imports and encourage the use of customary trade credits._ By the end of 1990, short term debt had fallen to US$2.9 billion, or less than 36 percent of total debt, compared to US$3.6 billion, or more than 45 percent of total debt at the end of 1989.

The 1989 swing of the convertible currency account into deficit was largely finai.ced by a US$ 1.1 billion drawdown of reserves. Net external borrowing totaled just US$0.3 billion as net new MLT borrowing was largely offset by US$0.6 billion in net short-term repayments. In the first half of 1991,theconvertible currency tradebalance moved into deficit by about US$500 million, compared with a suwplus of almost US$50 million in 1990. The deterioration was due to the transfer of most payments for Soviet oil onto a convertible currency basis. The underlying growth of nonoil imports and exports was roughly balanced.<sup>The</sup> value of convertible currency imports soared almost 50 percent to US$4.1 billion in the first half of 1991 compared to a year ago, reflecting both payments of US$80-100 millionamonthforSovietoilaswellasimpoxtliberalization. First half exports rose almost 30 percent compared to the first half of 1990 to a dollar value of US$3.5 bilion.<sup>The</sup> increase is attributable to some redirection of exports from eastern to western markets and to higher EC quotas for some products such as textiles.

Financing in 1991 came largely from official creditors for the first time.

_Table 9:_ CSFR External Financing Flows (in US$ million)

||1982|1Q|1221|12|
|---|---|---|---|---|
|External Borrowing, Net<br>of which|553<br>|315<br>|1,699<br>|1,050<br>|
|Commercial Banks|469<br>|-271<br>|-364<br>|-17i<br>|
|Disbursements|493<br>|467<br>|170<br>|285<br>|
|Repayments|428<br>|-315<br>|-384<br>|461<br>|
|ST Credits, net|-21|423<br>|-150<br>|0<br>|
|Other Private Creditors, Net|<br>0<br>|221<br>|-201<br>|167<br>|
|Disbursements|340<br>|480<br>|147<br>|266<br>|
|Repayments|-269<br>|-189<br>|-398<br>|-139<br>|
|ST Credits, Net|-71|-70|50|40|

Source: HF, Country Report dated November 22,1991 Following a small negative ransfer to commercial banksin 1990,therewasanetinflowofUS$182millionin 1991, and this trend is expected to continue, although in a smaller amount for 1992. Inflows from other private creditors jumped in 1990, dropped sharply in 1991 and are expected to rise again in 1992.

Funds in 1990 were raised primarily by two bond issues in Germany (each DM 350 million) plusa private placement in Japan at the end of the year (Y 5 billion). These funds are assumed by market experts to have come equally from commercial banks and other private investors. Joint ventures raised most of the remaining net MLT financing, much of it guaranteed by western export credit agencies. The State Bank reports that the net short term outflow was accounted for in roughly equal parts by the withdrawal of short termn deposits and by the net repayment of short term trade credits.

The State Bank was expecting to issue a bond in mid1991 if marketconditions werepropitious and if they could beconfidentofapositivereception.ThiswouldbetheState Bank's first issue on its own after guaranteeing the two bond issues by Obchodni Banka in 1990. The State Bank finally ventured into the private capital market at thewid of October 1991 with a US$200 million three year bond. The issue was in fact very well received. The State Bank of Czechoslovakia also issuedY10billion of six yearprivate placement bonds in November 1991. In addition, the State Bank authorized more than 20 Czechoslovak companies<sup>to</sup> borrow US$120 millionabroadin 1991. Another Samurai issue in dollars, in the amount of US$200 million was arranged by Nomura Securities with a three year maturity, in December 1991. (See Annex 1 for a summary of bond issues since 1990).

Itisestimated that official bilateral creditorsprovidedin net somewhat over US$300 million, and that other private creditors provided almostUS$60 million net. Commercial banks appear to have received net repayments of almost US$100 million in 1990.

The use of trade credits was expected to increase in 1991, largely due to payments restrictions introduced in October 1990 to force importers to take up customnary trade finacing.

More unguaranteed trade financing, plus the State Bank bond issue, could bring net financing of almost<sup>US$200</sup> million fron commercial banks and almost US$100<sup>mil-</sup> lion from other private creditors. In addition, direct<sup>invest-</sup> ment flows are up sharply and may total US$450 million for 1991, much of it accounted for by the VW investment in Skoda Auto. The capitalization of newly permitted foreign bank operations accounted for another<sup>US$30</sup> million. The combination of substantial direct foreign investment inflows, large disbursements of official credits 17