Prague's budget marked by uncertainty. The capital is looking for savings due to the coronavirus

Prague presented the state of its budget and the plans for 2021.
09.Oct 2020
 
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"We work with uncertainty and we don't know what will happen tomorrow, it is constantly changing",

said Pavel Vyhnánek, Deputy Mayor for Finance and Budget. The city's budget will be based on the ongoing coronavirus pandemic and related government measures. The city assumes that it could be dealing with tax revenues of 53.4 billion crowns and current expenditures of 41.7 billion crowns next year. The amount of future investments is not yet known. However, Prague does not want to limit them and eventually plans to borrow money for them.

10 billion drop in financing

This year, Pavel Vyhnánek expects a drop in Prague's finances exceeding 10 billion crowns. The most significant loss for the city regarding revenue is Prague's integrated transport, where losses amount to up to 1.5 billion crowns. The budget deficit also applies to contributory organizations, such as theaters, zoos or botanical gardens. However, the city had to dish out its largest expenses in in relation to Covid-19. Support for tourism and the cultural industry and subsidies for sports organizations... All this had cost Prague 1.3 billion crowns by the end of September 2020.

Budget for 2021

Davy lidí u Pražského hradu.
Davy lidí u Pražského hradu. • Source: pixabay.com/Duernsteiner

"We are planning a budget in an unprecedented situation. We don't know what will happen in half a year, but we have to draw up that budget, "

said the representative of the capital city of Prague Pavel Vyhnánek.

Three unknowns

When drafting the budget for next year, the city will have to operate with three unknowns. The first is the economic downturn due to the coronavirus pandemic. Another unknown is how the amount of retrospectively applied tax loss, the so-called loss carryback, will be reflected in the city budget. The last factor will be the unpredictable behavior of the government in relation to the economy of municipalities and regions and the strategy of state debt. The key to supporting the economy will be, above all, the emphasis on investment, which should restart the economy, said Pavel Vyhnánek.

Výhled na Pražský hrad
Výhled na Pražský hrad • Source: Profimedia

Half of the income will go to transport

Currently, the city works with the assumption of receiving tax revenue of 53.4 billion crowns, which is 3 billion less than this year. Half of this amount will go to public transport. Current expenditures should be around 41.7 billion crowns.

Prague plans to operate with a realistic budget that takes into account the fall in revenues. Therefore, there will be cuts in current expenditures in most areas, with the exception of the basic functions of the city - the Prague integrated transport system or waste collection.

Investment of 7 billion

While current expenditures are being cut, the goal for the coming year is to reduce capital expenditures as little as possible. Their budget is set at 7 billion crowns.

How to avoid drastic traffic restrictions?

The cost of PID is rising year by year. In the current budget proposal, with it being the only service from current expenditures, they expect an increase in the budget, namely by 1 billion crowns compared to this year. As a result, the city should avoid drastically reducing public transport.

The requests received by Prague included an increase of 7 billion compared to the approved budget for 2020.

"Over the past years the city grew and did not cut its spending, it was not forced to do so. So it was a big change, "

said Pavel Vyhnánek.

Pražská tramvaj.
Pražská tramvaj. • Source: pixabay.com/WolfBlur

A threat to the budget

Currently, the biggest threat is the abolition of the super-gross wage, which, however, is not foreseen in the current budget and this decision has not yet been approved. However, the city wants to be prepared for the worst. If the super-gross wages were really abolished and the state did not take any further measures to protect regions and municipalities, then Prague would lose almost 5.5 billion crowns, according to September's predictions.

The budget should be approved in its final form in December of this year.

Turisté na vyhlídce v Praze.
Turisté na vyhlídce v Praze. • Source: profimedia.com

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