Proposal for Harmonizing Different Methodologies of Public Debt Coverage and Measurement in Serbia
February 24, 2012
Fiscal Council holds that it is necessary to harmonize the Public Debt Law and the Budget System Law with respect to different capture and measurement of the public debt, so that such single calculated value of public debt can be in official use by all relevant government institutions. For this reason, we have conducted a research the purpose of which was to offer a proposal for improving Serbia’s public debt capture and measurement methodology. The basic criteria used in forming the proposal were the economic justification and compliance with the current international standards.
Assessment of Fiscal Rules Compliance in 2011
February 21, 2012
The Fiscal Council holds that: 1) the general fiscal rule concerning the public debt level was violated; 2) the general fiscal rule concerning the government deficit level was not fully accomplished; and 3) the special fiscal rule determining the pension and public sector salaries trend was accomplished. Violation of the fiscal rule concerning the public debt poses the greatest threat for Serbia’s public finance since the debt has not only exceeded the legal limit of 45% of GDP but it will continue to grow in the medium term. The 2011 fiscal deficit was by 5 billion dinars in excess of the limit permitted by the fiscal rules. The real problem is not the slight increase of the 2011 deficit level but in establishing unfavorable trends of fiscal revenues. It is for this reason that the Fiscal Council is assessing that further adjustment of 1% of GDP will be necessary.
Evaluation of the fiscal strategy report and Draft 2012 budget law
December 23, 2011
The envisaged fiscal deficit of 4.25% of GDP (153 billion dinars) is in conformance with the fiscal rules; there are, however, pronounced risks of the planned deficit overshooting. The Fiscal Council’s assessment is that at the close of 2011 the public debt will most probably be above the legal limit of 45% of GDP. There are strong prospects for the real growth of GDP to be lower in the next year than the planned 1.5%. In the medium run, lasting sustainability of public finance requires fiscal adjustment by 4.5 to 5 p.p. of GDP.
Fiscal Council Press Release on the Establishment of the 2012 Fiscal Framework
November 10, 2011
Bearing in mind slower pace of economic activity in the Euro zone and current economic trends in Serbia, the Fiscal Council reduced the economic growth projection for 2012 from 3% to 1.5%. In line with the fiscal rule on budget deficit, the given modification would result in the increase of the allowed 2012 deficit from 3.9% of GDP as originally planned to 4.5% of GDP. However, the consequences of the lower economic growth will for sure include the overrun of the public debt limit of 45% of GDP in 2012 which was defined by the law. For this reason, the Fiscal Council believes the 2012 deficit should be below 4.5% of GDP.
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Assessment of the Proposed Revised Republic of Serbia Budget for 2011
September 29, 2011
Fiscal Council assesses that the proposed Republic of Serbia budget deficit increase by 22 billion dinars is in accordance with Fiscal Rules and Budget System Law. We positively assess the fact that deficit increase is not driven by the increase in expenditures, but is driven by the drop in revenues due to slowing of economic activity. We negatively assess the change in the composition of expenditures – whereby current expenditures have been increased at the expense of capital expenditures, which had been reduced by 8 billion dinars, from 32 billion to 24 billion dinars. We confirm that expenditures for public sector wages and pension had been budgeted in accordance with the indexation formula prescribed by the Fiscal Rules and the Budget System Law. Fiscal Council has identified risks that revenues might underperform, due to possible additional slowing down of economic activity by the end of the year.
Analysis of the Fiscal Effects of the Draft Decentralization Law proposed in the Serbian Parliament by “Ujedinjeni Regioni Srbije”
June 8, 2011
We assess that the proposed model of fiscal decentralization would annually increase the budget deficit by 1.1% of GDP, ie about 40 billion dinars in 2012. Thus, the proposed model is not fiscally sustainable and its adoption requires considerable fiscal adjustment of 1.1% of GDP at the central government level. Otherwise, adopting the proposed decentralization model would seriously breach the Fiscal Rules, budget deficit in 2012 would be by one third higher than allowed – which would disrupt fiscal sustainability and macroeconomic stability.
