At the end of July, the state budget deficit rose to CZK 192.7 billion, from CZK 183 billion in June. At the end of July last year, the finance ministry said the budget showed a deficit of CZK 279.4 billion, which was the worst June result since the Czech Republic was founded.

The government last week approved an amendment to this year’s budget with a deficit of CZK 330 billion. In March, the House of Commons approved this year’s budget with a shortage of CZK 280 billion.

Revenues from the amended budget amount to CZK 1.678 trillion and expenditures to CZK 2.008 trillion. The House is expected to discuss the amended budget in September. The government has a majority of 108 out of 200 votes in the lower House, so it can be assumed that the budget will pass.

Total budget revenues increased 8.9 percent year on year in July to CZK 911.2 billion. Following that, total budget spending decreased by 1.1 percent year on year to CZK 1.104 trillion.

According to the MoF, the year-on-year improvement in the balance by CZK 86.7 billion was still mainly due to minor COVID-19-related constraints and corresponding transfers and government compensation at the beginning of the year. According to the authority, the revenue side was helped by tax revenues, which were up more than 17 percent year on year.

On the other hand, high prices affected spending, for example, in the form of extraordinary pension indexation or increased housing and material need benefits. At the same time, the refugee crisis led to an increase in humanitarian aid, the MoF said.

Improvement of the balance by 87 billion

“After the improvement in the budget balance in June, the state managed a slight deficit of around ten billion in July. The 193 billion deficit is an 87 billion improvement in the balance compared to last year. Still, it is certainly not the benchmark we want to compare ourselves to,” said Finance Minister Zbyněk Stanjura (ODS).

On the expenditure side of the budget, he said the strong pace of state investment activity continued for the third month and will continue to accelerate in the year’s second half. He said the state funds for transport infrastructure and the environment have already received more than ten billion more than last year, in particular.

The most significant contributor to the growth in revenue was tax revenue, including insurance premiums (up 12.1 percent), with positive contributions from all major items, especially value-added tax, insurance premiums, corporate income taxes, and excise taxes. In contrast, revenue from the European Union and financial mechanisms fell by 10.2 percent. Moreover, the year-on-year comparison was distorted by last year’s income from the auction of frequencies (CZK 5.6 billion).

Current spending fell by CZK 20.3 billion despite increases in the subsistence and subsistence minimum, housing benefits, extraordinary indexation of all pensions or other social benefits, and spending related to solidarity aid to refugees, mainly reduced by lower anti-epidemic assistance payments. On the other hand, the MoF reported that capital expenditure exceeded last year’s actual by CZK 8.4 billion.

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