According to Milena Horcicova, the economic revolution of 1989 was made possible by assigning specific responsibilities to each individual. It was then that all economic policy became the responsibility of the Minister of Finance, under the control of the Communist Party.
All these changes were made possible by the work of a group of highly qualified economists from the Institute of Economic Forecasting. This all took place within the context of perestroic in Russia, a period marked by frequent specialized meetings between staff from the Institute, banks, and the Ministry of Finance. This group discussed all available options for implementing financial reform, so it's fair to say we were ready by 1989. Finally, in May of the following year, the Department of Financial Policy was established, taking over the tasks previously assigned to the Communist Party.
The Ministry of Finance thus became an organ of the Institute, replacing the State Planning Commission.
This radical transformation concluded with the Normalization period thanks, among others, to the work of the first Director of Financial Policy, who in the sixties was the dean of the Faculty of Economics.
Milena Horcicova has been involved throughout this entire process. She currently holds a high-ranking position at the Ministry of Finance.
– How did the division of Czechoslovakia into two countries affect the national economy?
During the Czechoslovak Federation, some ministries were exclusively federal, such as Foreign Affairs, Interior, and Defense. At times, up to three different versions of the ministry coexisted, as was the case with the Slovak and Czech Minister of Finance. Of course, however, another group of ministries were exclusively national, such as the Ministry of Culture.
This was a rather complicated structure for only fifteen million inhabitants, but it was the legacy of the Statute of the Federation of 1968.
In the pre-Czechoslovak era, the Czech lands were more developed than Slovakia. At that time, Slovakia needed more support because it was poorer. The Czechs faced no problems during the separation, as the percentage of the agricultural sector compared to the total workforce wasn't very high. Now it represents 3,5%, and I believe it's slightly higher in Slovakia, but not by much. The two former Czechoslovak countries have always been predominantly industrial.
– Although it is not exactly a macroeconomic issue, what is your opinion on the privatization of Czech banks?
The Czech banking sector is now perfectly consolidated. A significant financial effort has been made to attract foreign partners, and fortunately, we can now say that these institutions are highly solvent thanks to these partners who have entered the sector and whose professionalism far surpasses mere speculation.
There is no doubt that these new shareholders acquired banks with a healthy balance sheet and an extensive banking network resulting from the quantitative (geographic) and qualitative (technological modernization) expansion of the Czech banking sector over the last ten years.
– What powers does the Ministry of Finance have over financial institutions?
The State Commercial Bank has jurisdiction in this area. However, the Ministry of Finance also has jurisdiction over banking legislation. In fact, it has a department specializing in financial markets and, of course, actively collaborates in drafting laws related to foreign trade.
In short, there are a whole series of organizations that guarantee the control and supervision of financial markets and the perfect coordination between them all.
– Has the Ministry of Finance considered issuing Bonds or Debentures on the domestic market to obtain better financing and encourage citizens to save?
I must say that the problem of public debt in the Czech Republic is not as significant as in other countries, although it has indeed increased. If your question is how to finance this debt while minimizing its financial cost, we encounter two issues: one, as you correctly point out, is minimizing debt costs, and the other is financing it exclusively in the domestic market. Placing our debt in international markets is a highly debated matter.
Regarding the second point you raise, our situation differs from that of Spain or England, where a large portion of the debt is financed by savers thanks to the maturity of their financial markets, which unfortunately is not yet the case in the Czech Republic. This would certainly be an attractive alternative for our citizens and highly advantageous for the state budget and the Ministry of Finance.
– Economic growth over the last 10 years, despite the slight dip in 1996, has been spectacular. Growth is expected to approach 4,5% again in 2001. Unemployment has fallen to 8%, which is encouraging consumption. Let's make a forecast for the next 5 years based on these variables.
My department's mission is precisely to make these kinds of forecasts and establish the direct relationship between the variables you mentioned. Fortunately, we are known for presenting very realistic forecasts, unlike those presented by other countries.
This department was created in 1990 and at that time it was very difficult to make estimates with the basic macroeconomic indicators of the time, since on the one hand there was no database and on the other hand, because it was not yet very clear how all the political change was going to be addressed.
Now, twelve years later, with a standardized database and a sound methodology, it's possible to rely on the forecasts. The latest forecast is from September, and next year's budget will be based on it.
– Is your department involved in preparing the Republic's budget?
By law, the Minister of Finance is obliged to present to Parliament and the Head of Government the figures projected for the year 2002.
Therefore, this department belonging to the Ministry of Finance has a lot to do with the preparation of the General State Budgets.
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