The Czech Republic is currently grappling with a significant increase in its national debt, which has caught the attention of the public, economic experts, and analysts alike. Lukáš Kovanda, the chief economist at Trinity Bank, has raised concerns about the alarming rate at which the country is accumulating debt. He points out that the Czech Republic is now accumulating debt 25 times faster than it did during the eight-year period of the 1990s, from 1993 to 2001.

Kovanda warns that such a rapid increase in borrowing poses a significant risk, potentially leading the country down an unsustainable trajectory and eventually towards insolvency. He further emphasizes that the government has yet to propose any relevant measures to address this concerning situation.

In May, the Czech government is expected to present a package of measures aimed at tackling the issue. Kovanda believes that these measures will be crucial for the country’s economic development. However, he criticizes the government’s current approach of injecting new money into the economy, as it has only resulted in further debt. He argues that a gradual improvement of the situation is necessary to avoid a currency crisis.

Nomura Holdings, a Japanese financial firm, added the Czech Republic to a list of countries at risk of a currency crisis in December. While acknowledging this concern, Kovanda points out that the Czech koruna has actually been strengthening, particularly since the beginning of Russia’s invasion of Ukraine. In fact, it has shown more stability compared to the US dollar or Swiss franc. Thus, he believes that the Czech national currency is currently robust and not facing any immediate threats.

However, the country is still grappling with high inflation, which is expected to persist at current levels throughout the year. Although Kovanda anticipates a slight decrease in inflation next year, he warns that the decline will not be significant.

Given the current situation, Kovanda emphasizes the importance of the government’s forthcoming package of measures. He hopes that these measures will help improve the country’s economic outlook and urges the government to take decisive action to avoid a potential crisis. He suggests that gradual and targeted measures, rather than injecting new money into the economy, will be more effective in addressing the rising debt and ensuring long-term stability.

Article by Prague Forum