The gross foreign reserves of Slovakia increased by 2% year-on-year to US$ 17.1 billion at the end of 2005, the NBS reported. Reserves, measured in euros, went up more substantially by 17.4% y/y due to the appreciation of the dollar against the euro during the year. The level of the reserves was influenced specifically by the repayment of the state debt to Czech bank CSOB at the end of last year, which significantly reduced it. Otherwise, their dynamics was determined by the strong inflow of foreign capital – both loans and FDIs, which managed to offset the deficit on the current account. Reserves of the central bank rose by 3.4% y/y in 2005 while reserves, held by the commercial banks, dropped by 9.2% y/y but from a lower base. The data, in our opinion, confirms the argument that the external position of the country is still sustainable despite the high current account gap as there is no pressure on the foreign reserves and the ability to repay external liabilities.
