Schillerová: We'll only start cutting the budget deficit after 2026

Czechia's state budget deficit next year will be higher than this year's figure, despite expected economic growth and rising tax revenues. That's according to Finance Minister Alena Schillerová, who explained that the new budget is built on realistic figures rather than inflated ones.

According to her, the previous government had built the budget on unrealistic revenue and spending projections — had the current cabinet used those same "fictitious" numbers, the real deficit would have been tens of billions of crowns higher. The minister cited examples of underfunding: no money was set aside for approved digitalisation plans, the health sector had to urgently pass a law reallocating funds from the General Health Insurance Company to cover insolvent insurers, and education was short 3.7 billion crowns for teaching assistants, psychologists and other specialists — these costs were effectively being covered out of teachers' salaries.

Where the money will go

Infrastructure investment has been named the budget's top priority. Healthcare comes second: state payments for uninsured citizens alone will total 24 billion crowns, of which 3 billion is expected to be saved through efficiencies at insurance companies, meaning the actual budget outlay will be 21 billion. Hospital funding will also increase.

A separate line item covers exempting citizens and businesses from renewable energy fees, a pledge made in ANO's election programme. 14 billion crowns have been reserved for this, though the figure may be adjusted in September. The State Transport Infrastructure Fund, along with the ministries of education, health, and industry and trade, will also see notable increases. Defence will receive the guaranteed 2% of GDP, which in nominal terms amounts to 191 billion crowns — the minister noted that every tenth of a percentage point of GDP equals nearly 10 billion crowns.

Where savings were found

According to Schillerová, the biggest savings were found precisely in current spending on running the state apparatus — the ministry had to fight for every billion, and sometimes every hundred million crowns, with other government bodies. She reinstated the practice of reviewing unspent funds from previous years: ministries must first use money already allocated but not spent before requesting new funds. For every investment project, the ministry demanded a realistic figure that the body would actually spend within the year.

The minister estimates this year's budget deficit target will be met, barring any unforeseen events with serious consequences. Although the state lost 3.7 billion crowns due to the scrapping of the fuel excise tax, VAT collection is going reasonably well — as of 1 August, cash collection stood at just over 50% of the plan, roughly in line with usual trends.

The deficit figure to come later

Schillerová promised to announce the specific budget deficit figure for next year on Monday — it will first be presented to the government, and only afterwards to the public. Ahead of the elections, authorities pledged to keep the public finance deficit reliably below 3% of GDP; according to economists' estimates, under that condition the budget deficit itself should not exceed roughly 350 billion crowns.

The minister noted that the European Commission has approved Czechia's new fiscal-structural plan, agreeing to raise the permissible public finance deficit threshold to 2.8% of GDP from 2027, with a subsequent reduction of about 0.5 percentage points of GDP per year. To achieve this, the coalition will need to agree on a package of measures affecting both budget spending and revenue — the labour and social affairs minister, for instance, has already prepared a cut to unemployment benefits.

Separately, Schillerová said the budget includes just over 3 billion crowns for the completion of new reactor units at Dukovany — to buy back shares in EDU II, the company owed by the state to energy firm ČEZ. Construction is only just gaining momentum, so most of the costs will fall outside the budget: the state will lend to EDU II, which will later begin repaying part of the funds.

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Source: novinky.cz