18 Mar 2011

NZ could face borrowing difficulties after Japan disaster

6:01 am on 18 March 2011

The disaster in Japan could pose problems for the Government's plans to borrow more to meet the earthquake costs in this country.

Finance Minister Bill English says this year's deficit is on track to top $16 billion, a nearly 50% increase on last year.

He says it is appropriate to cover the costs of the quakes from increased borrowing rather than big spending cuts.

However, analyst Roland Randell from investment bank TD Securities in Singapore says the Japanese are among the biggest lenders to the New Zealand Government.

He says those funds could go back to Japan to fund reconstruction, potentially lowering demand for New Zealand Government debt, pushing up this country's borrowing costs.

Bill English admits that is possible but says the Government has no other option but to borrow more to fund the rebuild of Christchurch.