The state budget deficit reached 97.3 billion Kč ($4.7 billion), the Finance Ministry announced Jan. 2.

The 2006 deficit as projected by the Cabinet of the Social Democrats (ČSSD) should have amounted to 83.6 billion Kč, but pre-election promises forced the government's hand, and the Finance Ministry bumped its state budget deficit estimate to 89.6 billion Kč in November.

But the final 97.3 billion Kč figure shocked everyone.

For the first time, not only independent analysts but some government officials admitted that the state was losing control over its purse strings.

The ČSSD's former finance minister, Bohuslav Sobotka, said that the government was not keeping track of money transfers into particular ministries' reserve funds, which prevented it from issuing more precise projections of budget development.

Ministries put 45 billion Kč into reserve funds in December.

Because of the inability to halt the last-minute money transfers, Sobotka's successor, the Civic Democratic Party's Vlastimil Tlustý, did not vote for the 2007 state budget draft, making him the first ruling finance minister to fail to endorse a budget draft submitted by his own ministry.

Tlustý did so to protest additional expenditures for regional projects that parliamentary deputies approved in early December, which will most likely push the 2007 deficit over 100 billion Kč.

NextFinance economist Vladimír Pikora likened the government's handling of the deficit to playing with explosives.

"Public finances can be considered a time bomb because the economy's growth will slow down in the long term," Pikora said. "As a result, the pace of budget revenues will slow down, too. It looks as if we are getting closer and closer to an explosion, but politicians are still hesitant to take any measures."

Pikora said it was alarming that the 2006 deficit rose 73 percent against the year before, despite the 6 percent growth of gross domestic product (GDP).

Not only did the government overestimate the amount of revenues in 2006, but it underestimated the level of its expenditures, analysts said.

An increased growth of GDP balanced the lower-than-expected tax revenues, HVB economist Pavel Sobíšek said.

Pikora said the state got less than it estimated from social insurance, value-added tax and excise tax.