Budget Council: The deficit further points to high imbalances in public finances

Despite the better-than-expected result of last year’s state budget, its deficit continues to point to a high structural imbalance in public finances, the National Budget Council has said. The state’s economy ended last year with a deficit of CZK 360.4 billion. The amended budget approved in October envisaged a deficit of CZK 375 billion.

“Unfortunately, this (structural imbalance) is not changed by the approved form of the state budget for 2023, which envisages a total imbalance of the state budget and state extra-budgetary funds of CZK 328.4 billion,” the council said.

“In addition, there is a significant risk of further deepening, for example, as a result of further extraordinary valorization of pension insurance benefits,” it added.

In order to get rid of such high deficits in the future, the council said, systemic measures on both the revenue and expenditure sides are necessary.

As these measures usually require amending laws, this process needs to be started as soon as possible so that the 2024 budget can reduce the structural imbalance, the council added.

Last year’s financial result was the third worst on record. The deficit was 419.7 billion crowns the year before last and 367.4 billion crowns in 2020. The government initially planned a deficit of 280 billion crowns but amended the state budget in the autumn due to unexpected expenses.

According to Minister Zbyněk Stanjura (ODS), these were mainly CZK 27 billion for extraordinary pension indexation, CZK 17.4 billion for the energy saving tariff for households, and CZK 10.9 billion for increased social benefits.

The National Budget Council is an independent expert body whose main mission is to assess whether the state and other public institutions comply with the rules of fiscal responsibility set by law.