Czech National Debt Soars Above 3 Trillion CZK for First Time in its History
The Czech national debt increased to a record of more than 3 trillion crowns (€125 billion) in the first half of the year, crossing the 3 trillion mark for the first time ever. Since the beginning of the year, debt has increased by 149.6 billion crowns.
The debt ratio was 42.8 percent of GDP in the first half of the year, 0.1 percentage points higher than at the end of last year, according to the Czech Finance Ministry.
The debt translates to each Czech citizen owing 280,574 crowns.
The main reason for the increase in state debt was the sale of state bonds and treasury bills in order to continuously cover the state budget deficit, the ministry said in its quarterly report on state debt management. The budget deficit was 215.4 billion crowns in the first half of the year.
Most of the state debt is covered by medium- and long-term government bonds issued on the domestic market. Their value in the first half of the year was 2.6 trillion crowns. Other important sources of debt coverage are treasury bills with a maturity of less than one year and received loans and credits.
At the same time, the National Budget Council (NRR) drew attention to the problem of rising debt levels. Its boss, Mojmír Hampl, in a letter addressed to the head of the Budget Committee, Josef Bernard (STAN), warned against accepting a multibillion-dollar loan from the European Commission, which was approved by the government against the will of Finance Minister Zbyňek Stanjura (ODS).
At the end of June, when asked by the Echo24 newspaper, Stanjura himself stated that “unfortunately” the state budget also includes servicing the state debt. “We paid 50 billion last year, 70 billion this year, 90 billion next year, 100 billion in 2025. It’s already happened, it won’t change anything. No government, no parliament, no law,” Stanjura said.
“If we want to consolidate, then between 2022 and 2024 there will be a difference of 40 billion only in the interest. Theoretically, let’s imagine that it is Jan. 1, 2024, and we have a budget balance of minus 90 billion. Consolidation efforts are also based on this,” Stanjura added.
At the beginning of this year, the national debt amounted to 2.9 trillion crowns. In the June update of the national debt financing strategy, the Ministry of Finance assumed that the debt will increase to 3.2 trillion crowns over the course of the year. The debt ratio at the end of the year should be 42.7 percent of GDP, i.e., the same as at the end of 2022.
On the other hand, according to Friday’s Eurostat data, the debt of the European Union decreased to 83.7 percent of gross domestic product (GDP) in the first quarter from 87.4 percent of GDP in the comparable period last year.
The national debt is made up of the money the government owes and arises primarily from the accumulation of state budget deficits. It is financed by treasury bills, government bonds, direct loans and loans from the European Investment Bank. According to the approved state budget, the cost of servicing the state debt should reach 69.2 billion crowns this year.
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