2003 state budget priorities to be reconsidered due to floods

Prague city part of Zbraslav, photo: CTK

As the water in the Czech Republic has been receding, it may take two weeks before all the damages to both private and public property are assessed. However, one thing is clear - the devastating floods over the past two weeks caused more damage than the previous biggest floods in modern Czech history, five years ago. Although the total losses have not been established yet, government representatives say it will be necessary to revise next year's state budget priorities, including a purchase of modern supersonic fighter jets for the Czech Air Force. Vladimir Tax has more.

Prague city part of Zbraslav,  photo: CTK
Preliminary estimates speak about damages exceeding 60 billion Czech crowns, or 2 billion USD. Discussions about ways to cover the damages have started in government and parliament. It is now obvious that the government will have to revise state budget priorities for next year, because of the double impact of the floods on the treasury - apart from the damages that need to be covered, there will be a drop out in tax revenues.

Finance minister Bohuslav Sobotka said the cabinet would primarily use this year's budget reserves and revenues from the privatisation of state-owned companies, such as the dominant telecommunications operator Czech Telecom, the national gas importer Transgas, and the Unipetrol refinery and chemical works conglomerate. The total income from these sales amounts to nearly 200 billion CZK or 70 billion USD. Mr. Sobotka however ruled out the sale of the power utility CEZ to raise more money or an emission of state bonds similar to those which were used to finance flood damages in 1997.

The government says it does not want to increase the state budget deficit of almost 160 billion planned for next year. That means it will have to revise its priorities - the topmost priority will be renovation of the affected areas. Nevertheless, observers say, ministers will probably be reluctant to make substantial cuts in social welfare, agriculture and education spending.

One of the budget chapters that are open to reduction is defence. Defence minister Jaroslav Tvrdik made it clear that the plan to purchase 24 new multi-role supersonic fighter jets for the Czech Army is completely out of the question. He said he wanted to find a cheaper way to safeguard Czech aerospace once the service life of the Air Force's fleet of outdated Soviet-made MiG-21s is over.