Budget deficit significantly lower than expected

Minister of Finance Jiri Rusnok (left), photo CTK

The Finance Ministry has announced that the Czech Republic's state budget in 2001 ended with a significantly lower deficit than expected. However, the overall deficit of public finances has grown further and analysts warn that this trend is unsustainable. Vladimir Tax has the details.

Minister of Finance Jiri Rusnok  (left),  photo CTK
According to the latest information provided by the ministry of finance, the state budget deficit in 2001 has proven to be significantly lower than the original allowance approved by parliament. Nevertheless, the deficit is the highest ever since 1993. Originally, the Lower House approved a state budget deficit of 49 billion crowns, and then nearly doubled the figures to 84 billion because of extraordinary expenses, such as drought compensation for farmers, and compensation for members of bankrupt credit unions.

At a press conference on Thursday, the Minister of Finance, Jiri Rusnok, announced that the Czech Republic's state budget deficit for 2001 reached just under 68 billion, more than 16 billion crowns less than that the numbers previously approved.

"This result was achieved first of all by improvement of the tax collection, mainly the corporate taxes and partly the excises. And of course, it was achieved also by the very cautious expenditure policy of both the Ministry of Finance and other ministries."

Other factors that helped reduce the deficit included a lower than expected loss of the government's Konsolidacni agentura consolidation agency, lower expenditures of the National Property Fund, lower interest rates on the state debt and lower wage costs in the public sector. These factors compensated for higher payments of social benefits as well as for significantly lower revenue from the sale of third-generation mobile phone licences.

Although the state budget figures are undoubtedly positive, the latest data confirms the continuing negative trend in overall public finances. The public finance deficit has widened further to a worrying 420 billion crowns, which is nearly 20 percent of Czech GDP. This unsustainable trend has been repeatedly criticised by both Czech economic experts and international institutions. The main problem is ever increasing mandatory expenditures, which, experts agree, cannot change without fundamental structural reform, starting with long-awaited reform of the pension system.