Czech Republic’s March Budget Deficit Reaches Record High

Jan Handrejch

The budget for March is in a deficit of 166.2 billion Czech crowns, which is the worst result for the first quarter since the Czech Republic was founded. Last year, the deficit for the same period was 59.1 billion Czech crowns.

According to Finance Minister Zbyněk Stanjura (ODS), the budget has been unfavorable due to additional spending on energy assistance. He said the priority is maintaining the planned deficit of 295 billion Czech crowns.

“The state’s financial management did not develop favorably in the first quarter of the year, mainly due to more than 100 billion crowns of additional spending on social benefits, assistance to people with energy, repayments of interest on old debts, but also higher investment activity of the state,” admitted Stanjura, who also noted that some budget items are pre-financed. He explicitly mentioned regional education or social services with science and research.

Prime Minister Petr Fiala subsequently stated that the government would maintain the set deficit, and the budget will stabilize during the year. “What is not so positive is the growth of expenses in the social area,” the prime minister stated. According to him, the numbers confirm the necessity of the pension increase, as approved by the government, which is lower than the original law had anticipated.

“I expect an improvement in financial management in the second half of the year, and my priority remains the adherence to the budgeted deficit of 295 billion Czech crowns. The decisive factor will be energy prices and related windfall tax revenues and levies from excessive electricity sales,” said Stanjura, who expects additional financial resources to come from dividends of ČEZ company and European sources.

Expenditures have increased by 37 percent

Budget revenues for the first quarter were 402.5 billion Czech crowns, up 13 percent year on year. The income from the tax on unexpected profits (windfall tax) is not yet included. Still, the state has already collected 8.17 billion Czech crowns from the levy on excessive profits from electricity production. By the end of March, state budget expenditures reached 568.7 billion Czech crowns, up 36.9 percent year on year.

According to the approved budget, the state should manage revenues of 1.93 trillion Czech crowns and expenses of 2.22 trillion Czech crowns this year.