Czech govt on track towards balanced state budget in 2017 - Babis


29.06.2014 15:43

Prague - The Czech Republic may post a balanced state budget in 2017, but the state must implement the planned measures improving tax collection in order to achieve this, Finance Minister Andrej Babis (ANO) said in debate Questions from Vaclav Moravec on the Czech Television today.


Ministr financí Andrej Babiš byl 29. června v Praze hostem diskusního pořadu České televize Otázky Václava Moravce. ČTK Krumphanzl Michal

It is not certain whether the government will succeed in this, Babis said.

A state budget with a deficit of Kc112bn has been approved for this year. For the year 2015, the government has proposed a Kc100bn deficit.

"We need systemic measures for the collection of taxes. And we need to invest, increase expenditures. And I am convinced that we will certainly post a surplus in 2017 thanks to the measures we have prepared," Babis said.

But he immediately corrected his statement. "Sorry, not a surplus, but in fact we will get into a phase when we will be able to have a balanced budget," he said.

"We are heading towards this, and I do not know whether we will succeed in this, but such is the goal," Babis said.

Babis's opponent in the debate, former finance minister and TOP 09 deputy chairman Miroslav Kalousek, said the target is much stricter that what he himself is offering.

Kalousek repeated that he had earlier proposed that the structural deficit be reduced by half a percent a year, that is by Kc20bn, by the government.

TOP 09 would support state budgets drafted in such a way if the government did so, he said.

"The Czech Republic's stable financial strategy is much more important that our mutual squabbles and we are offering this to you absolutely sincerely without ulterior motives," Kalousek said.

But if the government acts on the plans proposed by Babis, TOP 09 will also support the cabinet, because its steps would be in line with the strategy required by TOP 09, he said.

Analyst David Marek of company Patria Finance said having a balanced budget in 2017 is not only realistic, but also desirable.

Considering economic forecasts for this and next year, when the economy should be doing well, there is no reason why the government should not be cutting deficits, Marek said.

Babis also said that if the state runs an overall deficit of Kc200bn in 2014 and 2015, the state's debt will remain the same at a level of Kc1,683bn.

If calculated as a share on gross domestic product (GDP), the debt will even drop by 3 percentage points to 40.3 percent of GDP, Babis said.

"Because I have introduced restrictive management of the state's liquidity. This means that the bonds which were issued before will abundantly suffice, even if we have a Kc200bn deficit," Babis said.

"We will not increase the debt, even if we post a Kc200bn deficit," he said.

Kalousek said the state debt decreased for the first time last year, even though the budget posted a deficit.

However, the debt dropped thanks to the launch of the State Treasury as of January 1, 2O13, a project which can manage the state's cash flows much better, Kalousek said.

This enabled to reduce the debt reserve by Kc110bn last year, according to Kalousek.

This year, the system will enable to lower the reserve by further Kc36bn. This means Babis is not speaking about reducing net debt, but about reducing the debt reserve, he said.

"We could support the budget for 2015 only if expenditures did not increase compared with the government of (former prime minister) Rusnok, which evidently will not happen," Kalousek said.

Kalousek added that Prime Minister Bohuslav Sobotka (Social Democrats, CSSD) had invited him to visit the Government Office on Monday evening, so that they can discuss the offer proposed by TOP 09 of its support to budgets.

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