Czech Public Debt Rises to CZK 3.7 Trillion Despite Economic Growth

Despite decent growth in the Czech economy last year — 2.6% compared to the European average of 1.5% — the country's public debt has increased significantly. This is according to the Supreme Audit Office of the Czech Republic (NKÚ), which has published its annual assessment of the state of public finances.

The state budget closed last year with a deficit of CZK 290.7 billion — nearly 50 billion more than originally planned. This year's approved deficit stands at CZK 310 billion, while government officials expect it to climb to nearly CZK 400 billion next year.

Why the budget missed its target

According to the auditors, one reason for the deficit overshoot was lower-than-expected revenue from the sale of emissions allowances: instead of the planned CZK 30 billion, the state received only CZK 13.7 billion. Former Finance Minister Zbyněk Stanjura (ODS) had previously attributed the planned figure to an estimate by the Ministry of the Environment, but the NKÚ notes that this shortfall in emissions allowance revenue has now repeated every year since 2022. Stanjura himself said back in January that the real deficit was around CZK 250 billion, since part of the EU funds would only arrive this year.

NKÚ President Miloslav Kala said that budget deficits running into hundreds of billions of crowns have become the norm for Czech public finances. According to him, a substantial share of government spending fails to deliver a corresponding return in terms of competitiveness, productivity or innovation. "The Czech economy is being held back by high energy prices, and key reforms aren't even being discussed anymore, let alone launched by the government," Kala noted.

Debt keeps growing while the economy relies on consumption

He explained that last year's economic growth was driven mainly by rising household consumption and an increase in hours worked, rather than by productivity gains — and that is not a model on which long-term development can be built.

Czech public debt reached CZK 3.7 trillion by the end of last year, having grown by two trillion crowns over the past decade. Interest payments on the debt have more than doubled since 2021. According to Finance Ministry forecasts, the debt will exceed CZK 4.4 trillion next year, with interest payments alone requiring up to CZK 139 billion.

Roads, science and innovation — money without results

Almost CZK 129 billion was allocated from the state budget to transport last year, but according to the auditors, these investments have yet to produce the expected results. "The Czech Republic maintains a relatively extensive railway network, parts of which see little demand, and its upkeep requires significant funds that could be spent more effectively on modernising key rail corridors," the report states.

Things look no better when it comes to innovation: the state spent more than CZK 54 billion on science, research and innovation, yet the Czech Republic remains classified as a "moderate innovator" and is far from its goal of becoming a European innovation leader by 2030.

Source: novinky.cz