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Vatican Officials Cut Budget Deficit Prior to Pandemic

Reduced income from tourism, donations and commercial real estate could make 2020 another challenging year for the Catholic Church’s headquarters.

Photo: yara nardi/Reuters

ROME—The Holy See cut its budget deficit for 2019, reducing the financial pressures from previous investment losses, but the pandemic and its economic fallout pose new challenges for the headquarters of the Catholic Church.

The Holy See, in a summary statement on its finances published on Thursday, said its deficit last year was €11 million, equivalent to $12.9 million, on a budget with €318 million of expenses. The improved performance of financial investments helped reduce the shortfall from €75 million in 2018, a level that prompted Pope Francis last year to demand urgent corrective measures.

However, 2020 is set to be another financially challenging year for the Holy See, because of reduced income from tourism, donations and commercial real estate. One Vatican official familiar with the matter estimates the budget deficit in 2020 will be at least €40 million.

The Holy See consists of the central administration of the Catholic Church in Rome and the papal diplomatic network around the world. It is separate from Vatican City, the sovereign territory in Italy ruled by the pope.

Vatican City rarely runs a deficit but is likely to do so for 2020, since its largest source of income is the Vatican Museums, whose net annual revenue often exceeds €40 million but attendance has significantly diminished this year owing to the pandemic.

Thursday’s financial summary didn’t include figures for Vatican City or the Vatican Bank. The Rev. Juan Antonio Guerrero Alves, prefect of the Vatican’s secretariat of the economy, told official outlet Vatican News that the Vatican’s total financial assets—including those entities, the Holy See, the employees’ pension fund and the endowments of various foundations—come to about €4 billion. The exact value of the Vatican’s extensive real estate holdings is unknown but estimated to be more than €1 billion.

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Thursday was the first time the Holy See has released a summary of its financial statements since 2015. The Vatican has yet to release full financial statements for the Holy See or Vatican City, as officials have promised in recent years.

Thursday’s release was three days before the international Peter’s Pence collection. Peter’s Pence has been advertised primarily as an appeal for the needy, but church law permits the pope to use it for any purpose concerning his mission. The Wall Street Journal reported last year that only about 10% of the money was going to charity, with the majority being used to plug the Holy See’s deficit. The Vatican on Thursday said the Holy See had used €66 million of Peter’s Pence funds to cover its expenses in 2019, drawing in part on capital. Last year’s collection for Peter’s Pence raised only €53 million.

Thursday’s release comes as the Vatican continues to grapple with a scandal over a costly investment in London real estate. Pope Francis last week accepted the resignation of Cardinal Giovanni Angelo Becciu, who oversaw the London investment in his previous role as a top official of the Vatican’s Secretariat of State. Cardinal Becciu has denied wrongdoing and told reporters the pope didn’t mention the London deal when firing him, but rather, his alleged embezzlement of €100,000 from the Holy See.

The Vatican has charged an Italian businessman with extortion, embezzlement, fraud and money laundering in connection with the loss-making London investment.

Father Guerrero said the Secretariat of State has transferred its investments to the Holy See’s treasury and the Vatican Bank. He said future investments will be subject to centralized management which will ensure “greater transparency and more precise control” of investments across the Holy See.

“It’s possible that, in some cases, the Holy See has been not only ill advised but also swindled,” he said.

Write to Francis X. Rocca at francis.rocca@wsj.com

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