Debt threatens public finances; spending growth was huge last year.

Milan Malíček

In its annual report, the Supreme Audit Office (SAO) wrote that almost 90 percent of the year-on-year increase in total state budget expenditures the previous year was not related to the expenditures made in connection with the fight against the COVID-19 disease pandemic. According to the auditors, the rate of increase in the national debt may have severe implications for the sustainability of public finances.

The SAO said that last year saw a “huge increase in current spending,” while investment spending increased only slightly. This led to a record state budget deficit accompanied by a rise in the national debt.

The high rate of state borrowing under the ANO and CSSD governments and the lack of savings represent a severe threat to the stability of public finances in the long term.

In 2021, the state budget ended with a deficit of CZK 419.7 billion, which was the worst financial result in the history of the Czech Republic. The deficit increased by more than CZK 52 billion years on year. Although the economic restrictions related to the COVID-19 pandemic did not reach the same level as in 2020, “the SAO said.

The national debt rose to a record of CZK 2.47 trillion last year. Although the Czech Republic is still one of the least indebted countries in European comparison, the growth rate of the state debt in 2021 was the third-highest, the SAO pointed out.

Wastefulness and lack of control

For illustration, the auditors also documented exceptional savings opportunities. Health authorities spent over CZK 1.3 billion on purchases between 2017 and 2019. “Of this, up to 85 percent was spent on purchases outside the tendering procedure. Out of the sample of CZK 239 million audited, the institutes spent CZK 168 million unjustifiably, “the SAO stated.

According to the SAO, the state often did not evaluate or monitor the actual benefits of the aid distributed. This was also the case for investment incentives to help reduce unemployment. The Ministry of Industry and Trade provided more than CZK 75 billion in such support between 2000 and 2019. Although unemployment was falling, the number of incentives increased during the audited period, the SAO recalled.