The Czech Republic’s international investment position and external debt – commentary

as of 30 June 2022

Revised data as of the end of 2022 Q1 are being published simultaneously with the Czech Republic's international investment position and external debt figures as of 30 June 2022. The revised data reflect updated CNB data from statements submitted by financial and non-financial entities.

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In 2022 Q2, the Czech Republic's international investment position (the balance of its financial assets and liabilities in respect of non-residents) recorded an increase in deficit of CZK 57.5 billion to CZK 1,127.3 billion at the end of June. The deficit rose by CZK 278.6 billion in year-on-year terms and represented 17.5% of GDP at current prices. The Czech Republic's external debt amounted to CZK 4,566.9 billion (i.e. 74.3% of GDP) at the end of Q2. It recorded a year-on-year increase of CZK 338 billion.

Chart 1 - International investment position
(CZK billions, end-of-period balance)

External assets increased by CZK 369.8 billion to CZK 9,496 billion in Q2. The assets went up by CZK 1,698.9 billion year on year.

Chart 2 - Structure of investment position assets
(CZK billions, end-of-period balance)

The external assets of the banking sector (including the CNB, excluding portfolio investment and derivatives) accounted for 45.8% of total investment position assets. The reserve assets and other assets of the CNB dropped by CZK 130.6 billion in Q2, representing 38.9% of total assets.

The external assets of other sectors (excluding the government and banking sectors, portfolio investment and derivatives) increased in Q2 due mainly to a rise in short-term assets of corporations not associated with direct investment, and increases in equity stakes and reinvestment of earnings by domestic corporations in affiliated foreign firms. The external assets of other sectors accounted for 26.7% of total investment position assets.

Domestic investors' holdings of foreign securities decreased due to sales of part of foreign shares and bonds by domestic investors, representing 9.4% of investment position assets.

The positive fair value of derivatives increased by CZK 388.5 billion in Q2 and accounted for 17.5% of investment position assets.

The external assets of the government sector were unchanged in Q2, accounting for 0.6% of total assets.

Investment position external liabilities rose by CZK 427.2 billion in Q2, reaching CZK 10,623.3 billion at the end of June. In year-on-year terms the liabilities increased by CZK 1,977.5 billion.

Chart 3 - Structure of investment position liabilities
(CZK billions, end-of-period balance)

Direct foreign investment liabilities increased in Q2, accounting for 47.3% of total external liabilities. The main factors were equity capital increases in domestic companies in the form of reinvestment of earnings by foreign owners and drawdown of loans from affiliated companies.

A decline in portfolio investment liabilities in Q2 was due chiefly to a decline in holdings of bank and government bonds by foreign investors. Portfolio investment accounted for 10.8% of total liabilities.

The negative fair value of derivatives increased by CZK 488 billion in 2 and accounted for 17.6% of total liabilities.

The Czech Republic's external debt (the sum of its liabilities with stipulated maturity) fell by CZK 64 billion in Q2, totalling CZK 4,566.9 billion at the end of June. In year-on-year terms the debt increased by CZK 338 billion. As regards the time structure of the external debt, the share of liabilities with original maturities longer than one year was 36.2% of total debt liabilities.

Chart 4 - External debt by debtor
(CZK billions, end-of-period balance)

Turning to the sectoral breakdown of the external debt, the external debt of the government sector recorded a decrease in Q2. The government sector accounted for 11.5% of the total external debt.

A decline in the debt of the banking sector (including the CNB) reflected a decline in holdings of bank bonds by foreign investors, which exceeded an increase in deposits and loans accepted from abroad. The banking sector accounted for 46.9% of the total debt.

The external debt of other sectors (excluding the government and banking sectors) was almost unchanged. The drawdown of financial loans by corporations associated with direct investment was offset by a drop in holdings of corporate bonds by foreign investors. The external liabilities of other sectors accounted for 41.6% of the total external debt.

Turning to the breakdown of the external debt by instrument, deposits and loans drawn from affiliated corporations are the most frequently used forms of debt financing (together accounting for 52.5% of the external debt).

Chart 5 - External debt by instrument
(CZK billions, end-of-period balance)

The external debt of the private sector accounted for 77.2% of the total external debt. Public sector liabilities accounted for the rest (22.8%). They comprise liabilities of the government, liabilities of private entities guaranteed by the government and liabilities of entities majority-owned by the state.

Chart 6 - External debt of public and private sectors
(CZK billions, end-of-period balance)

As of 30 June 2022, debt service payments of principal and interest on long-term external liabilities planned in 2022 H2 totalled CZK 320.3 billion (of which principal amounted to CZK 272.6 billion and interest to CZK 47.7 billion).

Chart 7 - Debt service on medium- and long-term external debt liabilities
(CZK billions)

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