EXPLAINED: How Czechia's state budget works – and why the deficit could affect your finances

The state must also allocate significantly more funds (36 percent more year on year) to finance the state debt, which is to increase to CZK 95 billion from this year's CZK 70 billion.

President Petr Pavel has signed the state budget for next year with a planned deficit of CZK 252 billion – CZK 43 billion less than 2023’s deficit. What does the state budget exactly entail – and why does it matter?

A state government budget is essentially a detailed plan outlining how much money a state expects to receive and spend within a specific period (typically a calendar year) covering expenses like education, healthcare, infrastructure, and public services.

The state will spend less money than this year, but will nevertheless spend more than it receives – hence falling into a deficit. 

The budget's projected revenues will increase by CZK 12 billion, to CZK 1.9 trillion compared to this year. Planned expenditure, on the other hand, will fall by CZK 31 billion, to CZK 2.2 trillion.

Public spending has never been higher. Public debt is also at record levels, surging past CZK 3 trillion this year. The government has recognized it needs to make serious changes to sustain currently shaky public finances.

Aside from saving money, the state’s main priorities for the budget are maintaining living standards, ensuring a more sustainable way of financing healthcare, ensuring teachers' salaries at 130 percent of the average wage, and ensuring spending of 2 percent of gross domestic product is spent on defense.

One of the ways the government expects to increase revenue is via its widescale consolidation package. This will see many taxes broadly increase, social and health insurance contributions rise for the self-employed, and value-added tax for several products go up. 

The state will also save millions of crowns by removing 22 tax exemptions and discounts, including student tax credit, the tax discount for placing a child in pre-school education, and tax relief on non-monetary employee benefits.

Earlier this year, Prime Minister Petr Fiala said he expected the reforms to raise CZK 70 billion.

Thanks to the budget, CZK 683 million more should be spent on state employee’s salaries. The average teacher’s salary will rise to CZK 52,000 (by about CZK 2,500), and – after intense negotiations – hospital doctors will also see a pay increase next year (by between CZK 5,000 and CZK 15,000). 

The minimum wage will also rise by almost 10 percent next year. The average pension should rise to CZK 20,635 from January, although the government’s consolidation package means that this is a lower rate of increase than initially planned.

The average gross monthly salary of a state employee should increase by CZK 1,181, to CZK 44,059.

Defense is a key priority. Fiala has repeatedly cited the importance of ramping up defense spending amid continuing danger from Russia. NATO's defense expenditure guideline is also 2 percent of GDP, which Czechia previously committed to meet. Czechia will therefore spend CZK 160 billion on defense next year.

The education sector will also get increased funding following serious discontent from university staff and school teachers. Education will get CZK 4 billion more in 2024 compared to this year.

An extra CZK 35 billion will be channeled into healthcare to support both health workers’ salaries and public insurance contributions. 

The opposition vehemently opposes the 2024 budget. ANO parliamentary club chairwoman Alena Schillerová said that the budget increases operating expenses while reducing pro-growth investments. "This is not the budget of a confident and prosperous country with one of the lowest public debts in the EU, which wants to move forward and upwards," she said.

The opposition previously accused the government of “stealing” from ordinary people with the new, tax-raising budget.

Freedom and Direct Democracy leader Tomio Okamura accused the government of continuing to put the country into debt.

Pavel admitted in early December that he sees many problem areas in the draft budget, but he understood that the agreement at the level of the five coalition government parties requires many concessions.