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LISBON (Reuters) - Portugal has to reduce its high debt and will persist with fixing its public finances as this is key to maintaining the credibility it has regained with external creditors, Finance Minister Maria Luis Albuquerque said on Monday.
Portugal said last week that it will exceed its budget deficit for this year of 4 percent of gross domestic product and that the gap is likely to reach 4.8 percent.
National Statistics Institute INE said the overshoot was due to the inclusion under new EU accounting rules of financing of public companie.
"Portugal's economy is more solid than a year ago and 2011 (when it requested a bailout), but it is important to recognise that the adjustment is not concluded and the challenges faced by the country are very demanding," Albuquerque told a conference.
She said that Portugal's public debt "remains at very high levels and demands the continuation of (deficit) adjustment."
The country's total public debt should reach 127.8 percent of GDP this year, according to INE estimates, slightly down from 128 percent last year.
Bank of Portugal governor Carlos Costa told the same conference earlier that Portugal has to meet its budget deficit goals in order to "have the confidence of the markets that is necessary to roll over our debt."
Turning to the collapse of Portugal's second largest listed bank, Banco Espirito Santo (LS:BES), Albuquerque said its rescue had "demonstrated that the (financial) system today is more robust, better prepared and really integrated."
The state rescued BES in early August with a 4.9 billion euro package, mostly in public funds, after the business empire of its founding Espirito Santo family collapsed under a mountain of debt. The bank was split into a 'good bank' - Novo Banco - and a 'bad bank' that inherited all the toxic debt exposure.
(Reporting Sergio Goncalves and Daniel Alvarenga, writing by Axel Bugge, editing by John Stonestreet)