Government Approves 2027 Budget Draft: Deficit to Be Second Largest in Czech History

The Czech government, following a cabinet meeting, has unveiled the first details of the draft state budget for 2027. The deficit will amount to 389 billion crowns — the second-largest figure in the country's history, surpassed only by the pandemic year of 2021.

For comparison, last year's budget closed with a deficit of 290.7 billion crowns, while this year's approved deficit stands at 310 billion. According to the draft, budget revenues will grow by 3.3% to reach 2.189 trillion crowns, while expenditures will jump by 6.2% to 2.578 trillion crowns, the Ministry of Finance reported.

In its policy statement, the government pledged to keep the overall public sector deficit below three percent of GDP. According to Finance Minister Alena Schillerová, "the deficit is in line with the structural fiscal plan." The budget's top priority is investment in economic growth, with around 290 billion crowns earmarked from national sources for this purpose.

Transport, Healthcare and Defence

The budget of the State Fund for Transport Infrastructure will grow noticeably: despite an expected decline in European funding, it will increase by 10.6 billion to 180 billion crowns. The money will go toward both roads and motorways as well as railways.

One of the most notably growing items is healthcare: spending on medical care will rise by roughly 50 billion crowns year-on-year. The reason, Schillerová explained, is an increase in state payments for citizens insured by the state and higher health insurance contributions.

Defence will also receive substantially more funding. According to the minister, for the first time in Czech history, the Ministry of Defence's budget directly includes spending equal to two percent of GDP — about 191 billion crowns. Including other related items, total defence spending will reach approximately 195 billion crowns. In addition, the state spends around 18 billion crowns annually supporting renewable energy sources.

Public Sector Salaries and New Staff

The state plans to spend 36 billion crowns more next year on salaries and related personnel costs. This includes not only pay rises but also funding for new positions.

The government intends to hire 1,500 soldiers and 1,500 police officers. The education sector will gain more than 6,000 new staff, including school psychologists and other specialists.

Alongside the planned reform of public-sector pay, salaries for employees funded from the state budget — security forces, teachers, non-teaching staff and civil servants — are set to rise by five to nine percent. The government has promised to finalize the exact figures in September.

Pensions and Social Support

The largest single budget item is pension spending, which will grow by 19.2% year-on-year. In addition to standard indexation, this includes a planned increase of 500 crowns every five years for pensioners over 80.

Another sum the government describes as record-breaking will go toward social services, with support expected to reach 30 billion crowns. The cabinet also earmarks nearly 49 billion crowns to support public higher education. Among the budget's priorities are science, research and start-up support, as well as assistance for students — including the reinstated tax credit for students and compensation for kindergarten fees.

Relaxing Budget Rules

To finance its stated priorities, the government has significantly expanded its own room for maneuver in drafting the budget. The new rules governing the state budget — which the president attempted to veto, only for the Chamber of Deputies to override that veto — introduce two fundamental systemic changes.

Deficit limits are shifting from the previously stricter national rules to the more lenient European ones. In addition, the new rules provide for significant exceptions allowing the government to spend even more than even the relatively loose European rules would otherwise permit.

Source: seznamzpravy.cz