We have to admit that our income is not enough to cover our long-term expenses. This was stated yesterday by the Governor of the Czech National Bank (CNB) Jerry Rusnuk on the Czech TV discussion program Otázky Václava Moravec. According to him, changes are likely to be necessary, for example, in valuing key items of social transfers, including pensions. The head of the National Budget Council, Eva Zamrazilova, has reiterated that the Czech Republic will face the so-called debt brake early in 2024 due to the development of public debt.
The debt brake sets a threshold above which the government must submit a proposal with a balanced or surplus government budget and funds. It is set at 55 percent of GDP. Last November, the board assumed that public finances would not hit the brake on debt until a year later. According to Rusnock, this situation may not happen in 2024 or later, but it is necessary if it does exist.Clear path as sustainable development“.
“We will have to face the truth, stop jamming before the elections, and of course we say that our current income is not sufficient for our current long-term expenditures. We have to say we’re going to cut spending somewhere, and it’s not a game of firing a few hundred officials somewhere, maybe thousands, maybe a few thousand. That won’t be enough, unfortunately we have to admit it. We have to say how to value the main components of social transfers, including pensions. There will likely be a time when such generous valuation will not be possible in all situations.The governor said yesterday.
According to Resnok, it is about finding political consensus. “For the sake of stability today, tomorrow and tomorrow, we must take certain steps at a certain moment, which of course are not pleasant and not everyone will welcome and applaud them. Then there is the revenue side, where our share of income was not only low before, but in my opinion it was reduced quite recklessly by a really strange interference in the level of income taxes,Added.
Last August, the Governor of the National Bank of Canada and other economists Danusa Nerudova and Philip Matoyka agreed on the same agenda for discussion that eliminating super wages and introducing income tax rates was not a deliberate move by the government, which also threatens the development and sustainability of public finances. Government officials have repeatedly defended these steps.
Yesterday, Rusnock also commented on the March statement by Prime Minister Andrzej Babis (ANO), which called on the National Central Bank to contribute to the state budget in a similar manner to the central banks of Germany and Switzerland. Then, after talks with President Milos Zeman, Babish indicated that the Chinese Central Bank announced a profit of nearly 58 billion crowns in the previous year and 92 billion last year, and that the state budget had a large deficit for the Corona virus epidemic.
“The prime minister is kind of a political marketer and he’s shedding a lot of fog. I’m sure this was a fog“Deputy Governor Marek Mora spoke earlier about the transfer of the profits of the National Central Bank to the state budget yesterday. According to him, this is a legitimate requirement, but it is impossible at the present time.
The Czech Statistical Office (CSO) said earlier this month that public finances last year ran a deficit of 6.2% of GDP, mainly due to the effects of the coronavirus pandemic. In 2019, public finances showed a surplus of 0.3% of GDP. According to current data, total public debt increased to 38.1% of GDP last year from 30.3% in 2019. According to European Union rules, under standard conditions, public finances should not run a deficit of more than three percent of GDP. It must not exceed debt. 60% of GDP. In response, the Finance Ministry stated that the result was in line with its expectations.
Source: Reuters, CTK
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