Consolidated Financial Statements of the Czech Republic for the 2023 Accounting Period

Chart 1 illustrates the growth in total consolidated assets since 2016, accelerating in 2021 and 2022. In 2023, the rate of growth in total consolidated assets slowed to 2020 levels. Fixed assets showed a more significant change between 2021 and 2022, mainly due to the one-off accounting depreciation of the negative consolidation difference, growth in the value of buildings and fixed assets under construction. Current assets showed a more significant change between 2020 and 2021 (a 47.7% increase), primarily due to the increase in fixed futures and options (mainly market prices of emission allowances, electricity and gas at CEZ Group with a year-on-year increase of CZK 439.7 billion).

The amount of cash holdings as at 31 December 2023 was CZK 1,048.7 billion (a year-on-year increase by CZK 46.4 billion, i.e. by 4.6%). These are mainly cash and cash equivalents held in bank and other accounts of state consolidated entities. The cash holdings of state consolidated entities represent 66.7% of the Czech Republic’s current liabilities. In 2022 and 2023, the cash holdings were affected by exceptionally high inflation (15.1% and 10.7%), which caused partial devaluation.

Cash holdings of regional self-governing units and voluntary associations of municipalities (including allowance organisations established by them) reached CZK 490.8 billion in 2023 (CZK 413.3 billion in 2022). During 2023, regional budgets increased their savings by CZK 77.5 billion, i.e. by 18.7%. This is due to the fact that the income of the budgets of regional self-governing units has long exceeded their budgetary expenditures, including debt repayments.

Chart 2 shows a long-term upward trend in the cash holdings of the state consolidated entities, with a more intensive pace of cash growth rate in 2021 and 2022. In 2023, the pace of cash growth slowed. Cash holdings increased by CZK 505.7 billion from 2016 to 2023.

Information on Equity and External Resources (Debts)

As at 31 December 2023, total liabilities and equity amounted to CZK 7,503.8 billion, consisting 72.2% of external resources and 27.8% of equity. In 2023, there was a slight increase in the rate of external resources (debt) and a negative reversal in equity, among other things as a result of the year-on-year deterioration in the consolidated economic result for 2023 (a worsening of the result by CZK 30.0 billion, i.e. from CZK (57.1 billion) to CZK (87.1 billion)). Non-current liabilities under issued bonds with a total value of CZK 3,018.8 billion accounted for the largest share of external resources, while long-term government bonds issued by the Ministry of Finance of the Czech Republic amounted to CZK 2,861.7 billion after consolidation. The year-on-year increase in the value of long-term government bonds issued by the Ministry of Finance of the Czech Republic by CZK 299.4 billion (CZK 273.5 billion in 2022) was because of the need to cover the state budget deficit for 2023.

The Czech Republic’s external resources (debts) of CZK 5,414.5 billion increased by CZK 398.3 billion, i.e. by 7.9% year on year. Almost 56.0% of the Czech Republic’s total debt was made up of non-current liabilities under issued bonds as mentioned above. Another significant item of external resources was long-term loans of CZK 340.4 billion, i.e. 6.3% of the Czech Republic’s total debt. The majority of long-term loans, CZK 251.2 billion, belonged to the government part, of which the Ministry of Finance of the Czech Republic accounted for CZK 147.4 billion. 

Chart 3 shows that in 2020, the trend in equity and external resources changed (debt increased while equity decreased due to losses). In 2021, this negative trend continued, with the pace of debt growth accelerating year on year. In 2022, a positive development of equity and external resources was evident, but this did not continue in 2023. The decrease in equity in 2023 was due, inter alia, to the deterioration of the Czech Republic’s consolidated economic result (a year-on-year increase in the loss from CZK (57.1 billion) in 2022 to CZK (87.1 billion) in 2023, i.e. it deepened by CZK 30.0 billion year on year). The slight acceleration of the increase in external resources in 2023 (+0.7%) was mainly due to the year-on-year increase in current liabilities, which had declined year on year in 2022.

Information on Costs and Revenues

Total costs incurred by the Czech Republic for the 2023 accounting period amounted to CZK 3,655.5 billion (a year-on-year increase by 9.7%). Total revenues of the Czech Republic for the 2023 accounting period amounted to CZK 3,575.3 billion (a year-on-year increase by 8.5%). Therefore, costs rose 1.3% faster than revenues, resulting in a year-on-year deepening of losses by CZK 30.0 billion.

In 2023, operating costs accounted for the largest share of total costs, amounting to CZK 2,035.8 billion, i.e. 55.7% of the total costs (a year-on-year increase of CZK 77.8 billion, i.e. 4.0%). Of these, the most significant is the wage costs, amounting to CZK 591.8 billion (a year-on-year increase of CZK 40.5 billion, i.e. 7.4%). Wage costs in this report exclude contributions by employers (state consolidated entities) to social security and public health insurance, as these expenses have been eliminated due to consolidation adjustments.

Among business corporations, wage costs increased by 10.4% year on year. Wage costs increased among municipalities, including their allowance organisations, by 7.5% and among state organisational units by 6.9%.

The trend in wage costs from 2016 to 2023 is shown in Chart 4. In these years, wage costs grew by an average of 8.5% year on year, due to increases in wages, salaries and the number of employees in the consolidation group Czech Republic. The comparison between 2023 and 2016 shows an increase in wage costs by CZK 255.8 billion, or 76.1% (with cumulative inflation from 2016 to 2023 reaching 47.9%).

The financial costs amounted to CZK 281.2 billion in 2023 (a year-on-year increase of CZK 91.2 billion, i.e. 48.0%). The most significant financial costs were interest of CZK 140.5 billion (a year-on-year increase of CZK 25.8 billion, i.e. 22.5%). The largest share of interest, at CZK 120.1 billion, i.e. 85.5% of the total interest, was attributed to the Ministry of Finance of the Czech Republic, which recorded a year-on-year increase of CZK 18.7 billion, mainly due to the impact of higher costs of servicing the national debt.

Chart 5 shows that interest on external resources was slightly volatile until 2019. Since 2020, interest on external resources has been rising year on year (more significantly in the last two years), primarily due to the higher costs of servicing the national debt, driven mainly by its growth, interest payments on anti-inflationary government bonds, and worsening interest rate conditions.

Transfer costs reached CZK 1,338.5 billion in 2023 (a year-on-year increase of CZK 155.7 billion, i.e. 13.2%). The recipients of these transfers were entities outside the consolidation group Czech Republic, i.e. primarily natural persons. These were mainly social benefits of an insurance nature related to pension insurance (mainly old-age and disability pensions), as well as sickness benefits and unemployment benefits. In 2023, the Czech Social Security Administration provided the largest amount of funds for social benefits, amounting to CZK 716.3 billion (a year-on-year increase of CZK 93.3 billion, i.e. 15.0%). These were mainly pensions amounting to CZK 670.3 billion (in 2022, pensions accounted for CZK 574.9 billion, i.e. an increase of 16.6%). Another significant provider of social benefits was the Labour Office of the Czech Republic, which paid out CZK 138.3 billion in social benefits in 2023 (a year-on-year increase of CZK 4.4 billion, or 3.3%). Social benefits include housing allowance, benefits for material need, care allowance and unemployment benefit.

Chart 6 shows the annual increase in transfer costs. In 2020, the Covid-19 pandemic resulted in the most significant increase in transfer costs, by CZK 165.3 billion, or 17.7%, thus exceeding the CZK 1 trillion threshold for the first time. The increase in 2020 was mainly driven by higher sickness benefit payments, compensation to businesses due to the Covid-19 pandemic, and increased pension benefits resulting from pension indexation. In 2021 and 2022, the increase slowed significantly, i.e. it was 4.6% in 2021 and 3.0% in 2022. In 2023, the increase in transfer costs was mainly due to the increase in pensions. Pension costs rose year on year by CZK 95.5 billion (i.e. 16.6%).

Financial revenues increased by CZK 60.2 billion (i.e. 31.4%) year on year to CZK 252.3 billion. The interest component, which rose by CZK 30.1 billion (i.e. 55.5%) year on year to CZK 84.2 billion, represented the largest share of the increase in financial revenues. The increase in this item was mainly due to a higher interest rate on deposits with financial institutions, as well as the increasing volume of cash holdings of state consolidated entities.

Total revenues from taxes and fees, including shared revenues, reached a record level of CZK 1,800.6 billion in 2023 (a year-on-year increase by CZK 141.3 billion, i.e. 8.5%). The total revenues from taxes and fees, which are a source of state budget income, reached CZK 1,343.4 billion. Revenues from shared taxes and fees, which fund the budgets of regions, municipalities, and the State Fund for Transport Infrastructure (SFTI), totalled CZK 457.2 billion. The collection of taxes and fees is managed primarily through the General Financial Directorate, the General Directorate of Customs and the Czech Social Security Administration. The year-on-year change was mainly caused by revenues from personal and legal income tax, with an increase of CZK 64.2 billion (+16.6%), which was influenced, for example, by an increase in the minimum wage, employment and wage growth in the private sector, and the introduction of a temporary windfall profits tax as a source of financing to help the state with high energy prices. In addition, the year-on-year change was driven by social security revenues, which recorded an increase of CZK 43.6 billion (+8.5%). This increase was mainly driven by wage and salary increases. Value added tax revenues increased by CZK 32.2 billion (+5.9%), mainly due to inflation, i.e. growth in consumer prices.

Chart 7 shows the development of total revenues from taxes and fees, including shared revenue, from 2016 to 2023. An annual increase in revenues can be observed until 2019. In 2020, there was a 4.4% year-on-year decrease. This result was influenced by the impact caused by the Covid-19 pandemic and exacerbated by a number of measures aimed in particular at supporting legal entities and self-employed persons. The abolition of the tax on the acquisition of immovable property also influenced the decrease in revenues. In 2021, revenues from taxes and fees again grew slightly by 2.9% year on year. In 2022, this increase accelerated to 10.0%. In 2023, an increase of 8.5% in the value of total revenues from taxes and fees, including shared revenue, was recorded. Revenues from shared taxes and fees (the main source of income for regions and municipalities) increased by CZK 203.2 billion, i.e. 80%, from 2016 to 2023. As a result of consolidation operations and differences in reporting methods (accrual versus cash accounting), the reported values of revenues from taxes and fees differ from those reported in, for example, the State Final Accounts.

Transfer revenues increased by CZK 86.9 billion (i.e. by 30.0%) to CZK 376.1 billion year on year. The increase in transfer revenues was mainly due to higher revenues from grants received from the budget of the European Union (European Structural and Investment Funds) and Financial Mechanisms (European Economic Area and Norway Grants, Swiss-Czech Cooperation Programme). This was primarily due to higher drawdown from the National Recovery Plan (up CZK 45.2 billion year on year).

Chart 8 shows a long-term trend of a gradual increases in the Czech Republic’s costs and revenues until 2019. In 2020, the growth rate of costs accelerated compared to revenues, mainly due to the Covid-19 pandemic, which was the main cause of the loss for the 2020 accounting period. In 2022, a recovery in the Czech Republic’s performance can be observed, i.e. the difference between costs and revenues narrowed, ultimately representing a year-on-year decrease in losses by CZK 136.8 billion. In 2023, the trend of improvements in the consolidated economic result of the Czech Republic halted. It was primarily on account of the increase in transfer costs and financial costs that the loss deepened by CZK 30.0 billion year on year.

Information on the Consolidated Economic Result of the Czech Republic

The Czech Republic reported a net loss of CZK 87.1 billion in 2023. Thus, the positive development of the 2022 result was not repeated. The government part (including health insurance companies) operated at a loss of CZK (169.5 billion), while the municipal part reported a profit of CZK 82.4 billion.

In 2023, the year-on-year loss deepened by CZK 30.0 billion. This loss was mainly influenced by an increase in transfer costs (up CZK 155.7 billion year on year, i.e. +13.2%), which was primarily due to an increase in pensions paid (up CZK 95.5 billion year on year, i.e. +16.6%). Furthemore, this loss is also based on an increase in financial costs (up CZK 91.2 billion year on year, i.e. +48.0%), which was caused, inter alia, by an increase in interest on external resources (mainly interest related to the servicing of the national debt). The increase in the loss was also caused by a rise in operating costs (up CZK 77.8 billion year on year, i.e. +4.0%), mainly due to an increase in wage costs (up CZK 40.5 billion year on year, i.e. +7.4%).

On the positive side, there was an increase in revenues from transfers (up CZK +86.9 billion year on year, i.e. +30.0%), mainly due to higher revenues from grants received from the European Union budget (European Structural and Investment Funds) and Financial Mechanisms (European Economic Area and Norway Grants, Swiss-Czech Cooperation Programme). This was mainly due to higher drawdown from the National Recovery Plan (up CZK 45.2 billion year on year). Furthermore, there was an increase in revenues from taxes and fees, which are a source of state budget income (up CZK 83.1 billion year on year, i.e. +6.6%), and an increase in revenues from shared taxes and fees (up CZK 58.2 billion year on year, i.e. +14.6%), which are a source of income for local self-governing units (regions and municipalities) and the State Fund for Transport Infrastructure (SFTI). The increase in taxes was mainly due to an increase in proceeds from corporate income tax and personal income tax (up CZK 64.2 billion year o -year), on the back of growth in the minimum wage, employment, and wages in the private sector, as well as the introduction of extraordinary taxes. The increase in taxes was also caused by an increase in value added tax (up CZK 32.2 billion year on year), due to an increase in consumer prices. It was also driven by an increase in social insurance contributions (up CZK 43.6 billion year on year) due to wage and salary growth. There was also an increase in financial revenues (up CZK 60.2 billion year on year, i.e. +31.4%), which was mainly due to higher income from interest (on cash holdings in the accounts of state consolidated entities deposited with financial institutions), including interest on securities and loans granted.

^{Note: 2016 - 2019 (Profit), 2020 - 2023 (Loss)}

Chart 9 shows that from 2016 to 2019, the consolidation group Czech Republic was in the black. There was a turnaround in 2020, when a loss was reported for the first time since 2016. Since 2020, the Czech Republic has been running at a loss. The losses in 2020 and 2021 were mainly due to the Covid-19 pandemic, which had a negative impact on the economic performance of the Czech Republic as a whole. This also had a negative influence on the state budget, which recorded a deficit of CZK 367.5 billion in 2020 and CZK 419.7 billion in 2021.

Accounting Consolidation in the Context of Government Reporting

Data on the public finances of the Czech Republic are contained not only in the consolidated financial statements of the Czech Republic, but also in other documents or datasets, the most important of which are the State Final Account of the Czech Republic compiled by the Ministry of Finance of the Czech Republic and statistical data on the general government sector compiled by the Czech Statistical Office.

Each of these documents or datasets monitors and evaluates accounting data on the public finances of the Czech Republic (e.g. cash flows, financial position, economic result) from a different perspective. The composition of accounting entities varies depending on the reporting framework applied. This is due to the fact that accounting data are used for different purposes and their scope is adapted accordingly. Therefore, the figures in these documents or datasets differ and are incomparable due to the different approaches applied.

For more information on the consolidated financial statements of the Czech Republic, please contact the Ministry of Finance of the Czech Republic at konsolidace@mfcr.cz.

¹   The values in this report are generally presented after the consolidation operations at the level of the consolidation group Czech Republic, and therefore may not correspond to the disclosures in the separate financial statements of state consolidated entities.
²   The consolidated economic result for the current accounting period is not simply the difference between total revenues and total costs, but is further adjusted for minority interests and equity-accounted interests in the economic result.