These measures represent very important step towards the better public finance management, enhancing
of their transparency and quality
The National Property fund (privatisation fund) has nearly fulfilled its role as a transformation
institution and has finalised the privatisation of the vast majority of state property. Therefore its
operation should be concluded without liquidation by the end of 2005. Another step aimed at concluding
privatisation process is the termination of the activities of the Land Fund of the Czech Republic
(privatisation fund), planed to take place at the end of 2009. On the basis of the governments ́ resolution
the CKA^4 should conclude its operation without liquidation by December 31, 2007. Insofar as the effort
aimed at decreasing the number of extra-budgetary funds are concerned, the Chamber of Deputies has
approved an act on the conclusion of the activities of the Sate Fund for Land Fertilisation that should
take place as of January 1, 2006.
3. Results
As the reform was initiated in year 2004, we do not have enough data, which can indicate the
contribution of the public sector to GDP growth and public finance quality.
Annex 1: Spending reforms
In 2004 a number of legislative measures focused on rationalising public expenditure came into force.
Although the primary objective of these measures was to accomplish budgetary savings, many of these
measures improve economic incentives, contribute to a greater use of the labour force and strengthen the
supply side of the economy. Among measures with such effects can be included the increase in the
retirement age, substantial tightening of early retirement schemes, reduction in the generosity of
sickness benefits and abolition of the restrictions on earning while drawing some social benefits.
To provide an overview of the reform steps, this box summarizes all important spending measures that
affect public expenditures as of 2004.
Parametric changes in the pension system:
- Abolition of early retirement schemes with only temporarily reduced pension benefits;
- The statutory retirement age will continue to rise till the target age of 63 years for men and
childless women is reached; - Indexation of pension benefits will be kept to the statutory minimum (corresponding to consumer
price inflation and a third of the real growth in average wages); - Restriction of study years (after reaching 18 years of age) recognized as contributory periods and
acquired before January 1, 1996; - Abolition of the restriction on drawing pension benefits simultaneously with earnings in the first 2
years following retirement.
(^4) ČKA is a financial institution of non-banking nature that neither accepts deposits from the general public nor provides
loans. ČKA is a legal successor of Konsolidační banka. At the same time it is authorized to exercise all rights,
possibilities, and tools which KOB used to enjoy. The Government guarantees the liabilities of ČKA. ČKA, by law, will
cease to exist by 31.12.2007 without wind-up. The legal successor of ČKA is the Government represented by the
Ministry of Finance that will take over its rights and liabilities by the date of cessation of ČKA