Czech finance minister seeks quick savings to stem soaring 2023 budget gap

The Czech Finance Ministry will next week propose savings worth at least 20 billion crowns ($941.53 million) in this year's budget to stem an exploding deficit, Finance Minister Zbynek Stanjura said on Thursday after data showed the deficit soared to new record in May.

The central state budget deficit reached 271.4 billion crowns in January-May - its highest level ever for that period - hit by higher pension payments, spending on energy price subsidies and growing debt servicing costs.

The shortfall is already close to the full-year deficit target of 295 billion crowns.

Stanjura said that while income from windfall taxes, a dividend from majority state-owned utility giant CEZ XS208441833 and European Union funds would help in the second half, "we as the government must step on the brakes."

The measures Stanjura will propose next week come after the government unveiled plans last month for spending cuts and tax hikes to reduce the deficit by tens of billions of crowns next year.

It said then it would save more than 20 billion crowns next year on state salaries and operations.

"I think that we have to save at least that amount in spending this year given how state finances are developing," Stanjura said.

He said the measures would not be popular but that the government could not afford to wait.

The Czech budget may face a revenue shortfall of 50 billion crowns ($2.35 billion) this year due to rules governing the use of money from the EU's Modernisation Fund, Environment Minister Petr Hladik was quoted as saying on May 26.

Czech budgets have been battered since the COVID pandemic. The previous government delivered a record income tax cut - which Prime Minister Petr Fiala's party backed - that cut state revenue sharply.

State debt at one point was growing at one of the fastest rates in the European Union. It stood at 44% of GDP last year, still half the EU average but up from 30% in 2019.

($1 = 21.2420 Czech crowns)