Czechs to seek lower loan from EU recovery fund

FILE PHOTO: EU energy ministers discuss measures to rein in high gas prices in Brussels

PRAGUE (Reuters) - The Czech government will scale back a planned loan from the European Union's post-COVID recovery fund to 19.4 billion crowns (805.75 million euros), from the initially planned 137 billion crowns, Industry Minister Jozef Sikela said on Wednesday.

The reductions were made after consultations with the European Commission, which concluded some of the funding Czechia needs could come from other channels, Sikela said.

The earlier plan to take a larger loan was criticised by some non-government economists as it would raise debt and deficits over the next several years just as the government proposes tax hikes and spending cuts to narrow the budget gap.

The loan will come from the EU's Recovery and Resilience Facility (RRF) on top of grants already provided. Alongside the loan, the country will aim to get another 33.4 billion crowns in grants, the government has said.

"The lowering follows consultations with the European Commission which clearly showed that some type of projects will better be financed from the state budget or, such as in transportation projects, through loans from the European Investment Bank," Sikela told reporters.

The loan will be used to fund projects in digitalisation, development of computer chips and affordable housing, he said.

(1 euro = 24.0769 Czech crowns)

(Reporting by Jan Lopatka; Editing by Bernadette Baum)