Czech Republic posts record budget surplus of $2.4 billion in 2016

The Czech Republic central state budget reached a record 61.77 billion crown ($2.38 billion) surplus in 2016, the Finance Ministry said on Tuesday. A surplus had been expected, but its size is above market expectations of around 20 billion crowns and largely reduces Czech borrowing needs.

The Czech Republic posted its biggest ever budget surplus last year after the government spent less than planned and economic growth boosted tax receipts. The super-low yield environment has also led to large savings in public debt servicing (by almost 25 percent). The record surplus in 2016 was also the result of better tax collection and the drawing of more EU funds than originally envisioned.

Czech Republic has now become one of the small group of European Union member states to finish 2016 without a deficit. Ruling party leaders have seized the rare success to stake out their positions before fall elections. The spending plan has become the key battleground issue.

Social Democrat Premier Bohuslav Sobotka said the extra money could be shifted into 2017, which would eliminate this year's planned deficit. Billionaire Finance Minister Andrej Babis, whose ANO party leads in opinion polls said 2016 the surplus should cover part of state debt, which he said was at 34.3 percent of GDP.