This year, the Ministry of Finance will need 728.4 billion crowns to finance the state debt. This is 182.1 billion crowns more than the Office originally planned in the December Strategy for Financing and Management of the State Debt for 2021. The increase is mainly due to an increase in this year’s state budget deficit.
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“The newly amended definition of the operational framework responds to the increase in the need for financing in 2021 due mainly to an increase in the budgeted state budget deficit from 320 to 500 billion CZK in response to current developments in pandemics, adjustments in government direct assistance programs, reducing the tax burden on employees and current challenges related to the burden on the health system, massive vaccination and testing of the population, “the ministry said.
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The ministry first made such an extraordinary update a year after the pandemic broke out.
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The growth of the debt itself is mainly due to the issuance of government bonds by the Ministry of Finance with the aim of securing bond repayments and covering this year’s state budget deficit. The House increased the deficit in February.
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“The unprecedented issue of government bonds is a reflection of the increased need for financing this year due to the crisis deficit of the state budget,” said the Ministry of Finance.
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In the first quarter, the Ministry sold government bonds on the domestic financial market for 231.8 billion crowns – thus fully covering the koruna repayments of the state debt this year for 172.4 billion crowns and at the same time partially pre-financed this year’s state budget deficit. The Ministry of Finance partially covered the deficit in the first quarter by selling bonds worth CZK 59.4 billion and short-term reserve operations on the money market for CZK 145.9 billion.
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At the same time, the Ministry reiterated on Friday that the movement of the amount of debt during individual quarters is a common phenomenon caused mainly by the inconsistency of the distribution of a larger number of auction days against several repayments of government bonds during the year. According to the Ministry of Finance, this in itself does not indicate a trend in the country’s indebtedness.
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“The Ministry of Finance is continuously responding to the situation on the financial markets and, together with the effective management of government debt and available liquidity, the state treasury assumes that the total debt at the end of the year will not exceed the level reported as of March 31, 2021,” the office said.
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According to the Ministry of Finance’s material from the end of March, the state budget in a nutshell, the state debt should exceed 2.5 trillion crowns this year. During the years 2021 to 2023, it should increase by about one trillion crowns.
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The state debt consists of government debts and arises primarily from the accumulation of state budget deficits. It is financed by treasury bills, government bonds, direct loans or loans from the European Investment Bank.
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