In a surprising financial development, Czech municipalities and regions have reported a record surplus of 78.6 billion crowns for the first three quarters of the year, marking a 1.7% increase from the previous year. However, economists warn that this seemingly positive outcome masks deeper structural issues within the Czech Republic’s administrative system.
According to CSOB macroeconomist Dominik Rusinko, the surplus reflects significant fragmentation in the Czech settlement structure, with over 6,257 municipalities struggling to effectively manage their resources. Many smaller municipalities lack the expertise and negotiating power to undertake major investment projects, such as building kindergartens.
The Ministry of Finance has raised concerns about whether these budget surpluses are being adequately utilized for infrastructure development and public services improvement. Regional governments have seen a particularly dramatic increase, with their surplus growing by 49.1% to reach 32.1 billion crowns, while municipalities experienced an 18.4% decrease to 45 billion crowns.
Contributing factors to this financial accumulation include increased personal income tax collection, higher VAT revenues, and property tax adjustments. The collapse of Sberbank also played a role, with creditor payouts boosting non-tax revenues. By the third quarter’s end, regional governments held 132.3 billion crowns in their accounts, while municipalities maintained an impressive 418.9 billion crowns.