(Bloomberg) — The Czech government said it will prevent a budget overrun this year with help from a summer surge in revenue and the planned spending cuts.
Higher tax collection and inflows of European Union funds contributed to a second consecutive monthly surplus in July, the Finance Ministry said in a statement on Tuesday. The result lowered the cumulative shortfall so far this year to 214.1 billion koruna ($9.8 billion), reducing the risk that the state could exceed its deficit limit of 295 billion koruna for all of 2023.
“We assume this positive trend will continue,” Finance Minister Zbynek Stanjura said in the statement. “If we reach agreement with other cabinet ministers on savings worth about 20 billion koruna, this will help us meet the deficit plan.”
After winning an election two years ago on a pledge to rein in state debt, Prime Minister Petr Fiala’s ruling coalition had to roll out unplanned aid to shield households and companies from high energy prices. To get public finances on a more sustainable track, it has proposed a package of spending cuts and tax increases starting from next year, while Stanjura is also pushing to curb expenditure allocated for the rest of 2023.
The Finance Ministry expects the budget will further benefit from a record dividend from state-controlled power utility CEZ AS expected in August, as well as from advanced windfall-tax payments in September.
The fiscal-consolidation efforts and slowing inflation have helped Czech local-currency government bonds outperform most European peers this year. The yield premium investors demand to hold the 10-year notes instead of German bunds has shrunk to 169 basis points from a peak of 387 basis points last fall.