PLAIN LANGUAGE / PUBLIC FINANCES

Why does debt grow?

Borrowing can bridge a crisis. But when revenue persistently falls short of ordinary spending and interest, debt grows even in good years. Different causes need distinguishing.

Prepared and sources checked on 24 October 2026 · Independent educational website

01 / CONTEXT

Three different situations

Crises and the economic cycle

During a downturn, tax collection may fall and support needs rise. The deficit can increase without a new permanent benefit or tax law.

Persistent imbalance

Permanently lower revenue or higher expenditure can create deficits even at normal economic output. The structural balance tries to separate this underlying position from the cycle and temporary effects.

One-off spending and investment

Disaster recovery or a large project may require money before benefits arrive. Calling something an “investment” does not guarantee value or future returns.

Interest and other transactions

The state pays for earlier loans. Reserves, financial assets and other adjustments also affect debt changes, so they need not match the deficit.

02 / CONTEXT

The primary balance: the budget before interest

The primary balance separates interest from expenditure. It helps show whether ordinary finances, before the cost of old loans, add a new deficit. Even a primary surplus does not automatically reduce total debt: interest may exceed it.

Fictional example: the budget before interest has a surplus of 10 and interest costs 30. The overall result is a deficit of 20. These are not Czech data.

03 / CONTEXT

Debt in koruna versus debt relative to the economy

Nominal economic growth also affects the debt-to-GDP ratio. Interest relative to growth and the primary balance matter. The ratio can therefore fall even while the state owes more koruna.

An annual change alone does not establish a government's responsibility. Earlier laws, an adopted budget, economic shocks and new policies can operate simultaneously. Our matching of years to cabinets provides timing, not proof of causation.

Sources and further reading

Illustrative examples are neither an actual budget nor a personal obligation. For data, use the period and methodology stated beside the table.

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Prepared by Česko na dluh · Sources and editorial standards