The Fiala government approves the reduction of the budget deficit

The Fiala cabinet will present a budget with a deficit of CZK 280 billion to MPs by the end of March. The previous administration of Andrej Babiš proposed a budget with a higher deficit of almost CZK 100 billion.

The Fiala budget provides for a gap less than a quarter of that forecast by the last government. The deficit will also be 33% lower than last year, which set a new record.

A major change is that an increase in health insurance contributions for non-employees approved by the last ANO-led government has been dropped.

The new draft budget also envisages widespread savings on spending, as the current five-party government seeks to further balance the state coffers.

The State has been operating on a provisional budget for 2022 since the beginning of the year. This will end once MPs approve the new one before April. The first reading is scheduled for the end of next week.

Speaking after the government approved the draft budget on Wednesday, Prime Minister Petr Fiala described it as genuinely anti-inflationary.

He said his cabinet had managed to allocate sufficient funds for the country’s priorities going forward, without raising taxes.

Mr. Fiala accused the previous cabinet of putting citizens in debt. He and his colleagues had to answer that, he said, adding that they also had to find an answer to rising inflation.

The Prime Minister said that responsible management, financial resources for education and investment were the main priorities of the budget.

He also reaffirmed the government’s commitment to maintain teachers’ salaries at 130% of the average salary. He said no cuts had been made in planned transport infrastructure spending and the budget indexed old-age pensions.

However, the country’s trade unions have denounced certain austerity measures in the budget.

They oppose the freezing of health insurance contributions paid by the State for the benefit of seniors, children and the unemployed; the Ministry of Finance claims that this decision will save the state CZK 14 billion.

Unions are also seeking to negotiate wage increases for their members.

Czech inflation is expected to average 8.5% in 2022 and unions say real wages could fall for the first time in eight years.

The Fiala budget will see all government ministries receive more than last year – but less than they would have gotten under Mr Babiš’s promises.