In the future the government should borrow money only to finance investments in the economy, and root the economic policy in the growth of production, employment and exports, economists said.
They said the economic policy over the past 10 years had a wrong fundamental goal -- the stability of the exchange rate and prices, which they added had a discouraging impact on output and exports while relying on higher spending rooted in external borrowing.
This led to an increase in the budgetary, foreign trade and payments deficits, as well as in an increase of the public and overall debts, economists said.
According to figures presented at the conference, in the 1994-2003 period the public debt went up from 19.4 billion to 99.6 billion kuna, while its share in GDP went up from 22.2 to 51.6 percent.
This increase was mostly due to the growth of the external debt, which went up from 754 million kuna in 1994 to 51.4 billion kuna in 2003.
Since 1997 a portion of the internal debt was serviced with increasing frequency by borrowing abroad. Between 1998 and 2001 the growth of the internal debt was mostly due to the rehabilitation of the banking sector, which cost some US$1.4 billion, while in 2002 and 2003 it was mostly due to the cost of the pension system reform.
Economists said experts felt that state guarantees, which account for an increasingly bigger part of the public debt, were not statistically included as a part of the public debt in their entirety.
Economists believe the main measures to change the situation are to change the current policy of the kuna exchange rate so as to make it more favourable for exporters, and to put the public debt into the function of economic development by upgrading the public debt market.
($1 = 5.8 kuna)