Since this January, the debt has increased by 220.2 billion. According to ČTK, each Czech hypothetically has a debt of 286,474 CZK. The debt-to-domestic GDP ratio is 43.1 percent, which represents an increase of 0.4 percentage points since the beginning of the year.
If we compare this number with the neighboring countries, the Czech Republic has a slightly better result than its neighbors. For example, in June Poland had a debt to GDP ratio of 48.4 percent, Germany 64.6 percent, and in Slovakia the debt represents 57.8 percent of GDP and in Austria 78.6 percent.
The Ministry of Finance predicts that the debt will increase to 3.191 trillion crowns by the end of the year, but thanks to the growth of the domestic economy, the debt level will fall to 42.7 percent of GDP – it will therefore be the same as at the end of last year.
The main reason for the growth of the state debt was the sale of state bonds with the aim of covering ongoing state budget deficits and pre-financing state debt repayments, the ministry said. The budget deficit at the end of September was 180.7 billion crowns. The majority of the state debt consisted of medium and long-term state bonds issued on the domestic market.
“I consider it unfortunate how the national debt is managed in the Czech Republic, because at a time when interest rates were very low and some bonds were issued even with negative interest rates, a sufficient reserve was not created and now we have to finance the national debt with bonds that have significantly higher yields, and thus we pay more in interest,” comments Štěpán Křeček, Chief Economist of BH Securities, on the MF data.
According to him, the Czech Republic could save significantly on servicing the state debt if a sufficient number of bonds were issued at a time of low interest rates.
“I don’t think it’s appropriate to focus on the absolute amounts at a time of high inflation, inflation has reached roughly 30 percent over the last three years, so all the absolute amounts should jump quite substantially based on inflation alone. The year-on-year figures are incomparable, because today we buy far less for a billion than we bought for a billion five or ten years ago,” continues Křeček, saying that he is a supporter of expressing the debt in relation to GDP.
“The Czech Republic belongs to the less indebted countries of the European Union, but I would like us to be able to stop these increases in the future and to not be able to increase this expression of GDP in the future. This is not realistic at the moment, because deficit management is planned for the next few years as well,” concludes the economist.
