With major deficits projected, Vatican says Holy See not at risk of default

Vatican City, May 13, 2020 / 02:30 pm (CNA).- The new head of the Holy See’s financial office said Wednesday the Vatican is not at risk of fiscal default, even while reports in the Italian media indicate dire deficit projections for the Holy See.

Speaking to Vatican Media May 13, Jesuit Fr. Juan Antonio Guerrero Alves said the Holy See is sure to see its deficit grow due to the coronavirus pandemic, but is not in danger of default.

“That doesn’t mean that we are not naming the crisis for what it is. We’re certainly facing difficult years,” the priest said.

In fact, the Vatican had been facing difficult financial prospects before the coronavirus pandemic. In 2018, the Holy See had a budget deficit of 70 million euros in its 300 million euro budget.

Part of the 2018 budget deficit is connected to the write-off of a controversial loan involving a bankrupt Italian hospital. But even apart from that expense, Vatican deficits had raised alarms among curial leaders and the pope’s cardinal advisers before the pandemic began a global economic crisis.

Before the coronavirus pandemic, the ledgers indicated that income and expenses had remained “constant” from 2016 to 2020, Guerroro said, with expenses outpacing income by an average of 60 to 70 million euros annually, the priest said.

For the Holy See, the coronavirus crisis has meant the loss of revenue for the Vatican Museums, a major source of income for the Church’s curial work, along with collapsing market investments, uncertain income from real estate investments, and diminished contributions for the Church around the world.

On May 10, Italian newspaper Il Messaggero reported on an internal Vatican report that projects income reduction of at least 30%, and possibly as much as 80%, in the next fiscal year. Those projections forecast substantial increases in the annual budget deficit of the Holy See.

Responding to the situation, Guerrero offered different numbers. The priest said of internal projections that “the most optimistic calculate a decrease in revenue of around 25%; the most pessimistic, around 45%.”

The priest did not explain the discrepancy between his numbers and those of the internal report, but he did tell Vatican News “the best we can do is to be diligent and transparent. We’ll depend on the money we can count on.”

“We’ll build a zero base budget for 2021, beginning with the essentials for mission,” he added.

Guerrero underscored that the Holy See “is not a business,” and its “objective is not to make a profit,” but to be mission-focused.

According to Guerrero, the Holy See’s operating budget is “less than the average American university.”

He also said that the ongoing budget deficit “has nothing to do with” “poor administration” or an “immobile bureaucracy.” The priest added that the Peter’s Pence collection is not used as a deficit stop-gap, but is instead a donation intended to finance the mission of the Holy See, including the pope’s charitable work.

Forty-five percent of the Holy See’s budget goes to payroll, but neither Il Messaggero nor Guerrero said directly that layoffs could be coming. Instead, the internal report cited by the Italian newspaper discussed training staff to be able to complete more tasks, and mentioned the need for a broad overhaul of the Holy See’s approach to personnel, which it said was unlikely to happen amid current circumstances.

Guerrero started his term as the Vatican’s finance minister in January, after Pope Francis made the appointment in November 2019, to fill the position left empty by Cardinal George Pell’s departure in summer 2017.

The priest explained the distribution of the Holy See’s expenses, stating that roughly 45% covers personnel, 45% general and administrative expenses, and 7.5% is donated.

“There is a goal behind these numbers,” the priest said. “Behind the balance sheet there is a mission, the service that these expenses make possible. Perhaps we need to better explain, tell the story better. We certainly need to be clearer.”

Some portions of the Holy See’s budget, 15%, or 48 million, is used to operate Vatican Media and the related communications and publishing operations, he said. Ten percent goes to the nunciatures, the Vatican’ embassies in foreign countries.

Another 10% goes to support the Eastern churches and another 8.5% to the mission churches, according to Guerrero.

He also said that 6% of the budget, roughly 17 million, is paid in taxes to Italy every year.

About the impact COVID-19 will have on the Holy See’s finances, Guerrero said their calculations estimate a decrease in income of 25 to 45%.

He said the Holy See intends to cut expenses this year to help make up for the likely smaller revenue, but “it is clear that the deficit will increase.”

“We have asked each Entity to do everything possible to reduce expenses while safeguarding the essential services of its specific mission. At a more structural level (since the deficit is structural), we will have to centralize financial investments, improve personnel management, improve procurement management. Guidelines for procurement are about to be approved which will certainly lead to savings. We are working in constant collaboration with all the dicasteries, combining centralisation with subsidiarity; autonomy with checks and balances; professionalism with vocation.”

The prefect said he hopes to release a budget sheet sometime this year to show that the Holy See spends its money “to do good, and in the service of the Church.”

“It deserves trust.”

“We are not a great power. You can talk about the difficulty of making it in the large European countries. Imagine us. We need to be humble. We are a family with a small patrimony and the generous help of many. We’ll make it with our ability to manage well, with the help of God and the faithful. The whole Church is sustained in this way.”