MPs okayed record-high budget deficit. Critics expect future tax hike

Total increase in expenditures not necessary, economists say.

(Source: Sme)

Slovakia may see the highest deficit in its history post-pandemic, analysts worry in the wake of the parliament passing a revision to the state budget, which caused a discord in the ruling coalition and kicked off a debate about the future increase in taxes.

The surge in the Covid-19 infections that hit Slovakia last autumn and winter was accompanied by severe limitations in some business sectors, slashing the revenues of many companies and pushing some to the brink of bankruptcy.

Increased medical expenditures and state aid to the bleeding economy have exhausted state reserves put aside to cover the adverse effects of the pandemic. To replenish them, the government of Eduard Heger passed an amendment to the 2021 state budget, increasing expenditures and thus also its deficit.

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While economic analysts do not see any general problem in higher spending, they criticise the scope of the increase as it includes expenditures not related to the fight against Covid-19 and its impacts.

Radovan Ďurana, analyst with the think tank Institute of Economic and Social Studies (INESS), is afraid that the competition of the coalition parties in increasing budgetary expenditures will lead to the highest deficit in Slovakia's history. He finds it unusual that at a time of record deficits and rapid debt growth, Slovak politicians are coming up with increased parental bonuses or child allowances.

“Instead, we should talk about measures to bring spending back to pre-crisis normal. Unfortunately, there is silence about this,” Ďurana told The Slovak Spectator.

The junior coalition Freedom and Solidarity (SaS), which has been known as the party of economic liberals, criticised the increase in the expenditures as too high as well.

“Today’s deficits are tomorrow’s taxes,” said Marian Viskupič (SaS), head of the parliamentary committee for finances, during the parliamentary debate before the final vote.

Expenditures ballooned more than originally planned

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