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The Czech Republic’s debt is growing and with it the cost of interest payments to state creditors. Last year, public debt servicing amounted to 68 billion crowns, and economists expect it to rise significantly this year. Nevertheless, the Czech Republic is one of the countries with the lowest debt in the European Union.
Prime Minister Petr Fiala (left) and Finance Minister Zbyněk Stanjura. | Photo: CTK
The Czech Republic has to spend more and more money on the service National debt. At the end of October last year, it reached 3.115 trillion crowns, which was 43.1 percent of gross domestic product. “In 2023, the costs of servicing the national debt also rose further to 68 billion crowns, this year it should be almost a hundred billion crowns,” said ČSOB analyst Dominik Rusinko.
The state budget deficit in 2023 was the lowest since the Covid-19 pandemic, but at the same time the fourth highest in the history of the Czech Republic:
Last year, the state budget ended with a deficit of 288.5 billion crowns, Stanjura announced
The Czech Republic’s debt remains well below the average for EU countries. Eurostat figures published on Monday suggest that the European average was 82.6 percent in the third quarter of last year, with the state remaining the highest in debt Greece with an “axe” of 165.5 percent of GDP, followed by Italy and France. The opposite pole with the lowest debt is Estonia at 18.2 percent, followed by Bulgaria and Luxembourg.
However, there is no reason to celebrate. Statisticians pointed out that although debt is falling in the European Union, it is growing in the Czech Republic. Nevertheless, the amount is according to the client economist Jan Bureš’s Patria Finance does not present a major problem at the moment. “Debt sustainability is not yet a problem. However, in five or ten years the balance could increase and I don’t see that happening very well,” he commented.
The state has less and less money at its disposal
For example, with the money that the state paid last year as interest on the debt, more than 400 kilometers of highways could be built. Increasing these payments reduces the state’s maneuverability as the pie of money at its disposal becomes smaller.
According to Bureš, reforming the health and pension systems is therefore essential. At the same time, he believes the government has taken some sensible steps over the past year. “Right now we are a trusted economy and interested in it Czech bonds was,” he added. The most common creditors of the Czech state are financial institutions, banks, pension funds or investment companies. The yields on Czech bonds were also attractive a year ago.
The Czech Republic’s debt continued to rise last year, reaching 44.5 percent of GDP in the first quarter:
The European Union’s debt is falling. However, it continues to increase in the Czech Republic
However, the annual increase in the public finance deficit has been declining for two years in a row. While in 2021 the debt increased by almost 420 billion crowns, a year later by 316 billion and last year by almost 289 billion crowns. This year the government should succeed with a deficit of 252 billion crowns.
“Although the consolidation package promises a positive impact on the budget of 94 billion crowns, a larger part will be neutralized by higher spending, especially on social services and defense,” explained Rusinko. The last time the Czech budget recorded a surplus was in 2018.
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