Czech 2026 budget hits snag as election winners reject draft plan

PRAGUE (Reuters) -The likely next Czech government rejected the outgoing administration's 2026 budget draft on Monday, raising the chances of a delay to approving the plan by the end of the year and a higher-than-expected deficit.

Czech billionaire Andrej Babis' populist ANO party, winner of an October election and leading talks on forming the next government, has sparred with the outgoing centre-right cabinet over its 2026 budget plan, saying it lacks billions of euros to cover expected expenses.

The parliament's budget committee, led by ANO and its prospective partners, recommended on Monday that the full lower house reject the draft and demanded they resubmit a draft within 20 days - possibly with a higher deficit than the currently planned 286 billion crowns ($13.65 billion).

ANO's budget expert Alena Schillerova said on Monday that if the outgoing government could not cover changes recommended by the committee, then it should "adequately increase the budget deficit for 2026."

LOOKING FOR AN ALIBI, MINISTER SAYS

The dispute raises risks the budget may not pass through parliament by the end of the year, meaning the country would enter 2026 on a provisional budget plan that limits spending to one-twelfth of last year's annual expenditure per month.

Outgoing Prime Minister Petr Fiala's government already re-submitted the budget plan this month so that the next administration, likely led by Babis, would have a draft from which to work.

But ANO and partners - the right-wing Motorists party and far-right SPD - say the draft omits funds for infrastructure projects and social spending which would put the deficit at 381 billion crowns.

Outgoing Finance Minister Zbynek Stanjura defended the draft, saying it fitted within the state's fiscal responsibility laws and the deficit could not legally be raised any higher.

He said the election-winning parties were seeking to use the draft as an "alibi" to raise spending. 

Fiala's government has steadily cut the fiscal deficit, making the Czech Republic the lone central European state to return it to below 3% of gross domestic product as required by the European Union.

Finance Ministry forecasts put the deficit at 1.9% of GDP in 2026, the same as this year.

ANO's campaign promises of higher wages, more benefits like mortgage subsidies, and tax reductions have raised expectations of looser fiscal policy.    

($1 = 20.9540 Czech crowns)

(Reporting by Jason Hovet; Editing by Aidan Lewis)