PRAGUE — The Czech parliament’s lower house voted on Saturday to slow an inflation-linked rise in state pensions that has put increasing pressure on the budget in a period of fast rising prices.
The government has said the budget will save nearly 20 billion crowns ($905.84 million) this year if the change is approved by parliament by late March, ahead of the next pension adjustment scheduled for June.
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Saturday’s move was the first sign of the government trying to rein in the exploding budget deficit. The central state budget showed a record gap of 119.7 billion crowns in the first two months of 2023, due to soaring welfare payments and energy price subsidies.
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The pension adjustment bill, approved in a rushed procedure and after a fight from opposition lawmakers, would limit the rise in the average monthly pension to 750 crowns ($34) in June in the next round of hikes to be triggered by inflation.
That would be instead of the 1,770 crowns dictated by current legislation which orders annual pension hikes as well as extraordinary adjustments when prices rise by 5%.
Inflation hit 17.5% year-on-year in January.
The opposition said that if the bill also wins backing in the upper house and is signed by the president, it will challenge it in the constitutional court.
State pensions have risen faster than wages in recent years. The average pension was 19,440 crowns in January, up 30% over 14 months, the government has said.
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With an aging population and payments linked to inflation, the Czech pension system is becoming increasingly costly and the center-right government has signaled changes including raising the retirement age in the future.
This year’s central government budget deficit is seen at 296 billion crowns, with the overall public sector deficit forecast at 4.2% of gross domestic product by the Finance Ministry.
Apart from the pension adjustment, the government has pledged to find savings and raise indirect taxes worth a total of 70 billion crowns from next year to cut the budget deficit. ($1 = 22.0790 Czech crowns) (Reporting by Jan Lopatka Editing by Alexandra Hudson)
