Czech government approves plan seeking EU recovery fund loan

The Czech centre-right cabinet on Wednesday approved seeking a 137 billion crown ($6.25 billion) loan from the European Union’s post-COVID recovery funds, part of efforts to boost its energy transformation while cutting dependence on Russian fuels.

The loan, equal to 5.76 billion euros at current exchange rates, will come from the EU’s Recovery and Resilience Facility (RRF) on top of grants already provided. Alongside the loan, the country will aim to get another 33.4 billion crowns in grants, the government office said.

The EU set up its RRF of 724 billion euros in 2021, split between grants and loans to spend until 2026, designed to help economies rebound from the COVID-19 pandemic economic slump and also propel a shift in the energy sector.

The government said the funds will be aimed at energy projects, or projects to improve housing access, as high costs and rising prices have hit home buyers. Education projects will also be supported.

Drafting the loan will increase the country’s fiscal deficits while it seeks to cut shortfalls in the years ahead.

The government presented a package of tax hikes and spending cuts last month and said these would help bring the fiscal deficit, which ballooned due to a major tax cut and inflation-triggered pension hikes, to 1.8% of GDP next year.

European Affairs Minister Martin Dvorak said on Wednesday the government was looking at targeting the deficit this year at 270 billion crowns, down from a planned gap of 295 billion crowns that is already under threat from revenue shortfalls.

CTK news agency reported previous government materials showed a working deficit of 235 billion crowns for 2024. The government is due to debate the budget next week.