The Czech Republic’s budget for March 2022 showed a deficit of 166.2 billion Czech crowns, the worst result for the first quarter since the country’s founding. The deficit for the same period last year was 59.1 billion Czech crowns. The deficit resulted from additional spending on social benefits, assistance to people with energy, repayments of interest on old debts, and higher investment activity of the state. Finance Minister Zbyněk Stanjura confirmed that the budget had been unfavorable due to the additional spending on energy assistance, but emphasized the priority of maintaining the planned deficit of 295 billion Czech crowns.

Prime Minister Petr Fiala stated that the government would maintain the set deficit, and the budget would stabilize during the year. The Prime Minister added that the numbers confirmed the necessity of the pension increase, as approved by the government. Still, it was lower than what the original law had anticipated. He further emphasized that the growth of expenses in the social area was not positive.

The budget revenues for the first quarter were 402.5 billion Czech crowns, up 13 percent YoY, while the expenditures for the same period reached 568.7 billion Czech crowns, up 36.9 percent YoY. According to the approved budget, the state was expected to manage revenues of 1.93 trillion Czech crowns and expenses of 2.22 trillion Czech crowns in 2022.

Minister Stanjura expects additional financial resources to come from dividends of the ČEZ company and European sources. He also stated that he anticipated an improvement in financial management in the second half of the year, and his priority remained the adherence to the budgeted deficit of 295 billion Czech crowns. The decisive factor would be energy prices and related windfall tax revenues and levies from excessive electricity sales.

Overall, the government needs to make sure that the expenditures do not exceed the budgeted amount, as the country is already facing the worst budget deficit in history. The government needs to find ways to reduce the expenses and increase the revenue in the coming months to stabilize the budget.

Article by Prague Forum