Czech Republic’s foreign debt rises to CZK 5.27 trillion, driven by business and bank borrowing

At the end of 2024, the Czech Republic’s foreign debt reached CZK 5.271 trillion, representing an increase of CZK 460.4 billion year-on-year and accounting for 65.8 percent of the country’s gross domestic product. According to preliminary data released by the Czech National Bank (CNB), foreign debt rose by CZK 92.9 billion in the final quarter of the year alone. Foreign debt refers to the total liabilities with fixed maturity held by domestic entities toward foreign creditors.

The year-on-year increase was primarily driven by the private sector, especially businesses and banks. According to Petr Dufek, chief economist at Creditas Bank, higher domestic interest rates motivated Czech companies to seek financing abroad. Meanwhile, banks attracted foreign investors and savers to deposit Czech crowns in local accounts.

Despite the sharp rise, Dufek views the current level of foreign debt as safe. He noted that it is adequately covered by the CNB’s foreign exchange reserves and that the structure of the debt remains stable, with long-term liabilities making up a slight majority.

Private sector obligations made up 77.2 percent of the total foreign debt. The remaining portion included public sector liabilities, such as government-guaranteed debt and commitments by state-controlled entities. In the fourth quarter of 2024, the banking sector (including the CNB) and other non-government sectors increased their foreign borrowing, while general government debt decreased.

The CNB reported that the increase in bank debt was largely due to growing demand from foreign investors for bank bonds. The banking sector accounted for 37.8 percent of total foreign debt, while other non-government sectors represented 46.3 percent. Much of the increase stemmed from long-term loans secured by Czech companies from foreign lenders, as well as a smaller contribution from foreign investors purchasing corporate bonds.

On the other hand, the foreign debt of the general government dropped by CZK 38.1 billion in the last quarter of the year, mostly due to foreign investors selling off Czech government bonds. By the end of 2024, the public sector’s share of total foreign debt stood at 15.9 percent.

In terms of financial instruments, the most common forms of foreign debt were deposits and intercompany loans, making up 52.1 percent of the total. Looking at maturity, debt with original terms longer than one year represented 50.3 percent of all foreign liabilities.

Source: CNB