The state budget deficit will increase from CZK 40 billion to CZK 200 billion. President Milos Zeman signed the amendment to the Budget Act. The rise in the deficit is in response to the coronavirus pandemic. Due to the projected economic downturn, there will be a revenue shortfall and additional expenditures to fight coronavirus.
Budget revenues will drop CZK 89.8 billion compared to the original plan. While spending will grow by CZK 70.2 billion. The most significant deficit so far was in 2009 due to the impacts of the global economic crisis, over CZK 192 billion. The government wants to cover the shortfall by issuing government bonds.
The budget was approved by the Chamber of Deputies on Tuesday in a state of legislative emergency.
The Cabinet states that this year’s budgeting was based on the current data and forecasts that did not anticipate the spread of COVID-19. This disease brought with it a significant decline in economic activity and, thus, a reduction in tax revenues. Meanwhile, the state will tap the budget to fight the spread of the epidemic and to support the economy.
This year, total budget revenues should amount to CZK 1,488 trillion and expenditures to CZK 1.688 trillion. MEPs approved the amendment to the state budget as submitted by the government. However, they adopted an accompanying resolution. They called on the government to create an accelerated program for direct financial support for self-employed workers.
The deputies approved the change of the state budget in the presented form. No amendment passed. The House adopted an accompanying resolution on a proposal from its Committee on Budgets. It called on the government to develop an accelerated program for direct financial support for self-employed workers.
Minister of Finance Alena Schillerová assured the Chamber of Deputies that the economy, public budgets, and monetary policy would withstand the situation. The main change in expenditure is an increase in the government budget reserve of CZK 59.3 billion for operational use to address the effects of coronavirus spread. Initially, the budget reserve was CZK 4.9 billion. The minister said the state had already exhausted it to buy protective equipment to fight the coronavirus epidemic.
The amendment increases health insurance benefits by CZK 10 billion and expenditures on state debt service by CZK 5 billion from the original CZK 43.8 billion. The Ministry of Finance expects tax revenues to decline by CZK 55.7 billion due to restrictions on economic performance. On the expenditure side, the government wants to take the Ministry of Defense 2.9 billion for military purchases. He wants to save CZK 1.5 billion on fare discounts.