Record investments in transport infrastructure, increased money for education, science and defence, and spending to cover the consequences of the September floods are all included in the draft state budget for 2025 with a deficit of CZK 241 billion, which the Chamber of Deputies debated in its first reading today.
"The original draft of the state budget had five basic priorities, but unfortunately, due to the floods, a sixth priority was added. The state budget continues to consolidate public finances, which was confirmed yesterday by Eurostat results, according to which the Czech Republic has both the public deficit and the overall debt level under control. However, this trend must continue in the coming years, it is not yet done," said the Minister when introducing the proposal in the Chamber of Deputies Zbyněk Stanjura and added: "A new priority reflected in the draft budget is record capital spending with a record share of national investment. We have placed great emphasis on the shift to a knowledge-based economy, with a significant increase in the science research and innovation budget, while also taking into account our allied commitments under NATO membership to provide defence spending of 2 % of GDP. We have secured funding to address the impact of flooding of CZK 10 billion, which will be ring-fenced for this single purpose. If the overall extent of the damage is lower, the overall deficit will be lower. When you look at social spending, this draft budget will undoubtedly contribute to maintaining social reconciliation in the Czech Republic."
Extraordinary flood expenditure should not enter the structural deficit. Its reduction should therefore continue at a rate of 0.5 % of GDP in 2025. The medium-term budget outlook foresees a state budget deficit of CZK 225 billion in 2026 and a deficit of CZK 180 billion in 2027.
Of the total expenditure CZK 2327.1 billion forms the largest volume Mandatory and quasi-mandatory expenditure (salaries and EU contributions) in the amount of CZK 1,796.9 billion (year-on-year increase by CZK 62.7 billion). Of this, the Mandatory, i.e. statutory expenditure will reach CZK 1369.1 billion (+35.2 billion CZK). investments from national sources CZK 153.5 billion (year-on-year increase by CZK 35.6 billion), or CZK 249.6 billion after including EU funds (year-on-year increase by CZK 65.0 billion), current government expenditure will increase by CZK 70.0 billion, i.e. by 3.5 %.
The structure of spending reflects the government's priorities. Funding for Education were increased by CZK 21.9 billion in the chapter of the Ministry of Education, including EU sources, which also includes a year-on-year increase in expenditure on universities by CZK 4.0 billion from national sources. Thus, higher education will receive CZK 1.0 billion more than in the August draft budget. The government has thus used the CZK 1.0 billion available as a reserve up to the maximum allowed budget deficit under the expenditure frameworks. Total spending on science, research and innovation will increase by CZK 3.7 billion year-on-year to CZK 51.6 billion, including EU funds. The largest share will go to the Ministry of Education (CZK 22.9 billion, an increase of CZK 2.4 billion). The budgets of the chapters of the CAS, TAČR, GAČR and the Ministry of Health will also be strengthened.
State investment will be directed primarily to transport infrastructure, capital expenditures of the Ministry of Transport will reach a total of CZK 93.3 billion including EU resources (an increase of CZK 51 billion). "At the moment, 42 sections of motorways have been built and next year the construction of more than 100 km will begin, for example the Prague ring road from Běchovice to D1, another part of the D35 motorway to Lipník n. Bečvou or the bypass of Breclav. Railway corridors will also be expanded," says Minister Stanjura.
Mandatory expenditure (CZK 1 796.9 billion) represents social transfers and subsidies (social benefits including pensions) amounted to CZK 936.8 billion (increase by CZK 26.6 billion), of which pensions CZK 717.2 billion (an increase of CZK 11.0 billion). Debt service expenditure are expected to reach CZK 100 billion next year (an increase of CZK 5 billion). The statutory annual volume defence spending 2 % of GDP (in 2025 it is CZK 160.8 billion) is spread over several budget chapters - in addition to CZK 154.4 billion in the chapter of the Ministry of Defence, defence expenditures are also made in the chapters of the SSHR, NUCIB, NSA and MFA.
For teachers, who are guaranteed by law 130 % of average salary, 7 % more was allocated for salaries than last year (a total of CZK 103.5 billion, an increase of CZK 6.6 billion), while for other civil servants the budget foresees an increase in the amount of money for salaries by 5 % (total CZK 286 billion, an increase of CZK 19.4 billion). In their case, however, the government has yet to decide whether the increase will go exclusively to the tariff component or also to the above-tariff component and in what proportion.
The largest budget chapters (including EU funds) are still the Ministry of Labour and Social Affairs with the budget funds amounting to CZK 968.8 billion (year-on-year increase by CZK 42.2 billion due to the increase in mandatory expenditures by law), the Ministry of Education with the budget of CZK 290.8 billion, and the Ministry of Education with the budget of CZK 1.5 billion. CZK (year-on-year increase of CZK 21.9 billion), the General Treasury Administration with CZK 269.1 billion (decrease of CZK 4.5 billion), the Ministry of Defence with a budget of CZK 154.4 billion (increase of CZK 3.2 billion) and the Ministry of Transport with a budget of CZK 139.5 billion (increase of CZK 35.8 billion).
The total state budget revenues should reach CZK 2,086.1 billion in 2025, of which the collection of social security contributions is expected to amount to CZK 809.4 billion (up by CZK 53.2 billion year-on-year), VAT collection is expected to amount to CZK 414.0 billion (+ CZK 27.2 billion), excise tax collection is expected to amount to CZK 157.0 billion (- CZK 1.7 billion). The budget also includes revenue of CZK 153.6 billion from the EU budget and financial mechanisms.
The state budget now moves to the relevant committees of the Chamber of Deputies for discussion. During the second reading in the Chamber of Deputies, the budget may still undergo partial adjustments within individual budget chapters.
MF/ gnews - RoZ
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