Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 March 2025
In the first quarter of 2025, local government budgets recorded a surplus of CZK 36.2 billion. Although the surplus declined by almost half year-on-year, it still represents the second-highest result in the past decade, underscoring the financial stability of these entities. This trend is taking place amid a mild recovery of the domestic economy following a previous slowdown and the gradual easing of monetary policy.
Local government revenues remain heavily dependent on tax income, which decreased year-on-year in March, mainly due to lower corporate income tax revenues. Non-tax revenues also weakened, primarily due to a one-off effect from repayments made to Sberbank creditors in the previous year. As a result, budget self-sufficiency—defined as the share of own revenues in total revenues—declined, especially for regions.
On the expenditure side, there was a significant year-on-year increase, driven mainly by current expenditures, particularly transfers to schools. Capital expenditures rose primarily due to investments in educational and sports infrastructure. Municipalities and regions, however, continued to show substantial surpluses, indicating a high level of fiscal prudence and a strong commitment to maintaining financial reserves. This is evident in the substantial increase in bank account deposits – by the end of March 2025, municipalities held over CZK 430 billion in bank accounts.
Overall, despite a year-on-year decline in revenues and increased expenditures, local budgets maintain a healthy financial position. Thanks to relatively low debt levels and high liquidity, they remain well-prepared to face potential challenges. It is important to note, however, that municipalities are legally obliged to ensure the comprehensive development of their territories and meet the needs of their citizens. This includes investments in local infrastructure, which are essential for maintaining quality of life. Given the currently low interest rates, municipalities have an opportunity to take advantage of favorable financing conditions, thereby fulfilling their legal duties while also supporting local economic development.
Detailed information is provided in the Monitor system (data for territorial budgets can be obtained in the Analytical section under Local organisations).
Management of Local Governments
Regions, municipalities, and voluntary associations of municipalities recorded a budget surplus of CZK 36.2 billion in March 2025. Although the budget balance declined by nearly half year-on-year, it still represented the second-highest surplus on record (see Chart No. 1). After adjusting the budget balance for direct education expenditures and subsidies for private schools1, the surplus amounted to CZK 17.3 billion, reflecting a year-on-year decrease of 55.1%, or CZK 21.3 billion.
The total consolidated revenues of local budgets in March 2025 amounted to CZK 222.5 billion, a slight year-on-year decrease (by 0.8%, i.e., CZK 1.7 billion). After adjusting the revenues of regions and municipalities (in the case of the Capital City of Prague) for direct education expenditures and subsidies for private schools1, revenues amounted to CZK 151 billion. Own revenues of local budgets, which reached CZK 121.3 billion, declined year-on-year. The self-sufficiency of local budgets, representing the share of own revenues in the total adjusted revenues, also declined year-on-year to 80.3%. The year-on-year decline in own revenues is primarily due to a decrease in non-tax revenues, which fell by 21.8% (CZK 5.3 billion) to CZK 19 billion. This drop results from lower payouts to Sberbank creditors made in the previous year and a decline in interest income. Tax revenues also decreased year-on-year to CZK 100.2 billion. Transfers received by local budgets amounted to CZK 101.2 billion and increased, driven solely by growth in non-investment transfers. At the beginning of the year, however, investment transfers received declined year-on-year.
The total consolidated expenditures of local budgets in March 2025 amounted to CZK 186.4 billion, a year-on-year increase of 21.3% (CZK 34.4 billion). After adjusting the expenditures of regions and municipalities (in the case of Prague) for direct education expenditures and subsidies for private schools1, expenditures totaled CZK 133.7 billion. Current expenditures reached CZK 162.5 billion (a year-on-year increase of 21%, or CZK 28.2 billion), with the majority consisting of transfers provided by regions and municipalities to contributory and similar organizations. The year-on-year growth in current expenditures is mainly driven by non-investment transfers to primary schools. Capital expenditures increased year-on-year in March (by 23%, or CZK 4.5 billion) due to investments in primary schools and sports facilities owned by municipalities, amounting to CZK 23.8 billion.
Management of regions
In March 2025, the regions reported a positive budget balance of CZK 19.5 billion. Following the historically highest budget surplus achieved in the previous year, this year saw a year-on-year decline of 54.3%, or CZK 23.2 billion. Nevertheless, it remains the second-highest result in recorded history. After adjusting the regional budget balance for direct education expenditures and subsidies for private schools, the operating result amounted to CZK 4.5 billion, representing a year-on-year decrease of 68.6%, CZK 9.9 billion.
Total revenues of the regions reached CZK 108.4 billion by the end of March 2025, representing a slight year-on-year decrease (by 0.8%, or CZK 0.9 billion). After adjusting the revenues for direct education expenditures and subsidies for private schools1, the revenues amounted to CZK 45.6 billion. The regions’ own revenues slightly decreased year-on-year to CZK 27.8 billion, accounting for 60.9% of the total adjusted revenues. The decline in own revenues was mainly due to lower non-tax revenues, resulting from reduced payouts to Sberbank creditors that were carried out in the previous year. The dominant portion of own revenues consisted of tax revenues, which fell year-on-year by 2.7% (CZK 0.7 billion) to CZK 24.3 billion. The most significant year-on-year drop occurred in corporate income tax revenues, which fell by 22.3% (CZK 1.3 billion) to CZK 4.5 billion. Conversely, personal income tax revenues increased year-on-year by 7.5% (CZK 0.4 billion) to CZK 6.2 billion, reflecting continued growth in wages and salaries as well as tax changes effective from 2024. Value-added tax revenues remained roughly at last year’s level, with a slight increase of 1.3% (CZK 0.2 billion), amounting to CZK 13.6 billion. Other tax revenues, which make up only a small fraction of total tax revenues, declined slightly year-on-year.
In March 2025, the regions received transfers totaling CZK 80.6 billion, representing a year-on-year increase of 4.5% (CZK 3.5 billion). Of this amount, non-investment transfers received by the regions amounted to CZK 79.6 billion, a year-on-year increase of 8.1% (CZK 5.9 billion). The largest year-on-year growth was recorded in direct education expenditures, which rose by 9% (CZK 4.9 billion). Investment transfers received by the regions totaled CZK 1 billion, representing a year-on-year decrease of 70.1% (CZK 2.5 billion). This was due in part to a year-on-year decrease in transfers provided under the Integrated Regional Operational Program – EU funding (a decrease of CZK 2.4 billion).
In March 2025, total expenditures of the regions amounted to CZK 88.9 billion, representing a year-on-year increase of 33.4% (CZK 22.2 billion). After adjusting for direct education expenditures and subsidies for private schools1, regional expenditures amounted to CZK 41.1 billion. The largest share of the year-on-year increase in total expenditures was attributed to current expenditures, which rose by 34.8% (CZK 21.7 billion) to CZK 83.8 billion. Transfers provided by the regions to contributory and similar organizations amounted to CZK 61.9 billion, accounting for 73.8% of total current expenditures. These were primarily non-investment transfers provided to primary and nursery schools as part of direct education expenditures. Capital expenditures increased year-on-year by 13% (CZK 0.6 billion) to CZK 5.1 billion, mainly due to higher investment transfers to non-financial entrepreneurs for the construction or renovation of senior homes.
Debt and balance on the regions' bank accounts
The debt of regions, including their contributory organizations, amounted to CZK 25.9 billion at the end of the first quarter of 2025. Compared to the end of 2024, this represents an increase of 1.9%, CZK 0.5 billion. As shown in Chart No. 3, regional debt continued to grow even during a period of high interest rates and is still rising now, despite a gradual decline in rates. This suggests that interest rates do not significantly influence regional decisions on borrowing. The debt trend rather reflects the necessity of financing investments that often cannot be postponed.
As of March 2025, regional governments (including their contributory organizations) held CZK 127.6 billion in bank deposit, which is 21% more than in 2024, representing an increase of CZK 22.1 billion. After adjusting the deposits for direct education expenditures and subsidies for private schools1 that had not yet been distributed to schools and educational institutions by the end of March, the bank account balance amounted to CZK 112.6 billion. This represents a year-on-year increase of 6.7%, or CZK 7.1 billion. As illustrated in Chart No. 3, while regional debt has decreased by 2.1% since 2015, bank account balances have grown dynamically by 359.8%. Regions are continuing this trend and, in the first quarter of 2025, have thus far maintained the accumulation of their financial reserves.
Management of municipalities
In March 2025, municipalities recorded a budget surplus of CZK 16.3 billion, representing the third-highest budget result in the past decade (see Chart No. 4). Despite the year-on-year decline in the surplus, this development reflects the continued financial stability of local budgets. After adjusting the municipal budget result (the Capital City of Prague) for direct education expenditures and subsidies for private schools1, the surplus amounted to CZK 12.4 billion. Of this, the budget of the Capital City of Prague recorded a surplus of CZK 11.2 billion, with total revenues of CZK 34.4 billion and expenditures amounting to CZK 23.2 billion. Excluding Prague, the total consolidated revenues of municipalities amounted to CZK 82.2 billion, expenditures to CZK 77.1 billion, and the resulting budget surplus reached CZK 5.1 billion.
In March, total municipal revenues reached CZK 116.6 billion, representing a slight year-on-year increase of 0.1% (CZK 1.2 billion). After adjusting the municipal revenues (the Capital City of Prague) for direct education expenditures and subsidies for private schools1, revenues amounted to CZK 107.8 billion. Own revenues of municipalities, which in March accounted for 86.5% of total adjusted revenues, declined year-on-year and reached CZK 93.3 billion. This decrease in own revenues was mainly driven by a drop in tax revenues, which declined by 3.4% (CZK 2.7 billion) year-on-year to CZK 75.9 billion. The most significant decrease was in corporate income tax revenues, which fell by 18.5% (CZK 3.3 billion) to CZK 14.7 billion. Other revenues also declined (by 0.6%, or CZK 7.6 billion) to CZK 7.6 billion. On the other hand, personal income tax revenues increased year-on-year by 7.2% (CZK 1.2 billion) to CZK 17.4 billion, reflecting the continued growth in wages and salaries as well as the effect of tax changes effective from 2024. VAT revenues remained practically unchanged.
In March, municipalities received transfers totaling CZK 23.3 billion, representing a year-on-year increase of 21.6% (CZK 4.1 billion). Of this amount, non-investment transfers reached CZK 19.3 billion and increased year-on-year by 18.8% (CZK 3.1 billion). The growth was mainly driven by transfers related to education program, which increased by CZK 1.1 billion. Investment transfers received by municipalities increased year-on-year by 36.9% (CZK 1.1 billion), reaching CZK 4 billion. This growth was primarily the result of higher transfers provided under the Integrated Regional Operational Program 2021–2027, financed from public funds originating in the European Union.
In March 2025, total municipal expenditures amounted to CZK 100.3 billion, representing a year-on-year increase of 12.2% (CZK 10.9 billion). After adjusting the expenditures of municipalities (for the Capital City of Prague) for direct education expenditures and subsidies for private schools1, expenditures totaled CZK 95.4 billion. The year-on-year growth was mainly driven by an increase in current expenditures, which rose by 9.4% (CZK 7 billion) to CZK 81.5 billion, primarily due to higher salaries of local government employees. Capital expenditures also increased compared to the previous year—by 26% (CZK 3.9 billion), reaching CZK 18.7 billion. This was mainly due to increased investment in the construction of sports facilities owned by municipalities.
Debt and balance on the municipalities' bank accounts
At the end of the first quarter of 2025, the debt of municipalities, including their contributory organizations, amounted to CZK 63.3 billion. Compared to the end of 2024, this represents a decrease of 1.3% (CZK 0.8 billion). The year-on-year decrease in debt, combined with an increase in capital expenditures, confirms the sound financial condition of municipalities, which are able to finance their investment activities from their own financial resources.
As of March, this year, the balance of municipal bank accounts (including contributory organizations) reached CZK 430.5 billion, representing a 2% increase compared to 2024 (CZK 8.6 billion). After adjusting for direct education expenditures and subsidies for private schools1 that had not yet been distributed by the Capital City of Prague to schools and educational institutions by the end of March, the adjusted bank account balance of municipalities reached CZK 426.7 billion. This corresponds to a year-on-year increase of 1.1% (CZK 4.8 billion). As shown in Chart No. 5, while municipal debt has decreased by 27.2% since 2015, bank account balances have grown dynamically by 231.6%.
Management of voluntary associations of municipalities
In March 2025, voluntary associations of municipalities recorded total revenues of CZK 1.7 billion and total expenditures of CZK 1.3 billion. The budget balance decreased year-on-year but still resulted in a surplus of CZK 0.4 billion.
1 Direct education expenditures represent funds from the state budget (specifically from the chapter of the Ministry of Education, Youth and Sports), which the regions and the Capital City of Prague allocate directly to the respective schools and educational institutions. The regions and the Capital City of Prague have no discretion over how these funds are used. The same applies to subsidies for private schools. For this reason, the total revenues and expenditures of regions and the Capital City of Prague are adjusted to avoid distortions in their budgetary performance.