Vatican budget report: miracle or mirage?
The Holy See published better-than-expected financial returns for the financial year 2024, announcing the halving of its budget deficit and even generating a modest surplus.
The figures, the first profit and loss statement from the Vatican in several years, appear to support Pope Leo XIV’s somewhat positive approach to curial finances since taking office in the spring.
But how good is the financial news coming out of Rome, and how sustainable is the progress announced last week?
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After previous years without public disclosure of the consolidated financial statements, along with reports of continued asset mismanagement, a pension black hole, and increasingly urgent warnings from Pope Francis during his final months in office, the general assessment of the Holy See’s finances has been bleak.
The structural budget deficit was almost halved between 2023 and 2024, dropping from 83.5 million euros to less than 44.5 million. External donations, financial investment performance, and operational income generation were all up over the same period.
Operational costs rose, too, but the report from the Secretariat for the Economy was eager to stress that in the wider financial climate this was something of a controlled rise, rather than runaway inflation.
All in all, the figures appeared to support Pope Leo’s comments, given in July but published in September, that he wasn’t losing any sleep over the state of the Vatican’s finances, and that he felt there was a need to strike a more generally positive note around the Holy See’s economic prospects.
And, while there is no arguing with good results, reading the Vatican’s financial report last week, it is clear there is still work to be done.
But on the subject of messaging, one of the most striking things about the 2023-2024 financial year figures is that they seem at odds with the tone set by Pope Francis in the final months of his pontificate.
It’s worth recalling that the results released last week detail financial returns posted internally last June. While it will have taken some time to collate and organize all the different revenue and expenses strands across the Vatican, the direction of travel should have been clear enough — especially a direction as marked as presented last week.
It is odd, then, that this positive shift in the financial weather at the Vatican appeared to make Pope Francis more, not less, urgent in his attempts to shore up the Holy See’s financial situation — and prompted him to make a series of bleak, almost panicked sounding communications to the College of Cardinals this time last year.
Despite what would have been internally encouraging results last autumn, Francis wrote to the cardinals last year warning that tough decisions lay ahead, and that there was, after years of delay and missteps, now an urgent need to get spending under control in order “to guarantee the future of the Mission.”
Clearly, some efforts were made and yielded fruit, with the Vatican saying last week that its structural budget deficit had been reduced by nearly half.
Looking more closely at the report, though, it is clear that, despite a bumper year for revenues, the Vatican’s own money men believe there is a need to be cautious.
Despite years of cost-cutting measures, operational costs still grew by nearly 40 million euros from 2023 to 2024. According to the report, “2024 could be a turning point if [emphasis original], after years of stable or growing operating deficit, the Holy See [sees] the reduction of its operating deficit in the coming years.”
Of the Holy See’s various income streams in 2024, some 40% derives from “self-generated sources” like management of its real estate portfolio — yet it was here that costs appeared to balloon. Real estate maintenance costs rose year-on-year from 13.2 million euros to 24.2 million between 2023 and 2024.
The report does not specify where these additional costs came from, whether they represented an ongoing increase in keeping buildings fit for use, a needed upgrade to commercial and rental properties to increase their income returns, or escalating costs for maintaining the bulk of the Vatican’s property holdings which aren’t income generating at all but places of worship.
Where those costs fall on the range of ongoing vs. one-off expenses, and investment into future income vs. upkeep of sacred spaces could tell us a lot about the underlying health of the Vatican’s finances, and for the moment it remains unsaid.
What is known is that operating income for the Holy See rose almost twice as much as operational expenses from 2023 to 2024, and this accounted for the real progress in closing the Holy See’s structural budget deficit.
Of course, this still leaves a hole of more than 44 million euros a year in the Vatican budget, and while that was filled by extraordinary income last year, it is unclear how sustainable those kinds of returns will prove.
The Vatican saw a rise in external donations, both general and cause-specific, of some 20 million euros last year. Of all the progress shown in the report, rising individual donations might appear to be the most difficult to predict or maintain. But ironically, they might prove to be the most stable increase, at least in the very near future.
Francis followed up the 2024 donation rise in February of this year by inaugurating a new papal fundraising task force to coordinate fundraising for both general donations and specific campaigns, including Peter’s Pence.
Such a body, specifically charged with making the case for supporting the mission of the pope and the Vatican, has long been called for among Church observers and, according to Francis at the time of its inauguration, had become essential “in view of the current economic situation.”
The committee is beginning its work following a bumper year, which raises the possibility of it solidifying last year’s donations spike, and it could even expect to see a further rise following this year’s conclave and the election of the new pope.
Of course, much of the good financial news of last year cannot be expected to repeat itself.
The “2024 financial result was particularly strong, reaching 52 million euros and is related to the accounting impact of the sales of historical investments due to the commencement of the Investment Committee’s activity,” according to the report released last week.
While, on some level, more money is good news, the reality seems to be that this isn’t a new era of higher stable returns on investment for the Vatican, but a significant one-off realization of capital gains through the sell-off of investments, the proceeds of which appear to have gone to shoring up the Vatican bottom line, not into reinvestment.
In short, the money which closed the Vatican budget deficit last year is non-recurring and heavily market dependent, as was the case in 2023, when Peter’s Pence reported a surge in income — nearly all of which went to closing the Vatican’s budget deficit — linked to the sale of real estate assets.
These asset sales, now two years in a row, provide positive headlines and healthier balance sheets, and might go some way to explaining Leo’s upbeat approach to the Vatican’s finances. But the reality is the Vatican will eventually run out of things to sell, and this may have been the reality informing the late Pope Francis’ decidedly more gloomy outlook.
In the medium term, the unanswered question is whether rising expenditures — like those for maintenance of the real estate holdings — represent internal investment to boost long-term operating income, or just rising costs. And, at the same time, the financial reports released last week do not address other major underlying financial liabilities at the Holy See, like its underfunded pension fund.
According to the Vatican’s own report, “2024 could be a turning point if” — and it is a big if — the Vatican can finally get a grip on its budget. For that, we will have to wait until next year.
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