The drafted budget re-balance aimed at stabilising public finances, and, with specific objections, it could be described as good, Serbia's Fiscal Council said on Monday, but warned of insufficient transparency, citing "expenditures of around 1.3 billion euros" as an example.
The total amount of insufficiently clarified expenditures in the proposed budget re-balance reached 1.3 billion euros, the Council said adding „it is still unclear what exactly the capital budget of the Office for Public Investment Management is spent on; for what purposes subsidies to road companies are directed; what is the procurement of financial assets at the Finance Ministry; for which specific projects the funds are transferred to other levels of Government – with the already standard non-transparency of the huge capital budget of the Defence Ministry.“
The Council added that „the proposed, second budget revision for 2021, however, differs from previous crisis re-balances because it envisages a significant reduction of the fiscal deficit of around 900 million euros and represents a good basis for the necessary further stabilisation of public finances in the coming years.“
It recommended „the stronger reduction of the fiscal deficit in 2022 than originally planned is a very good measure of economic policy.“
„Although the proposed re-balance has certain weaknesses, we assess this adjustment of fiscal policy to the changed macroeconomic circumstances in 2021 as justified in principle,“ the Council said.
Commenting on the fiscal deficit in 2022, the Council added it should be planned more restrictively due to growing budgetary risks. It warned that „traditionally, the biggest risk for domestic public finances is the poor business of unreformed public companies.“ It named the state Srbijagas company and the national flag carrier Air Serbia as the highest potential cost for public finances in 2022.
The Council also advised the Government not to increase the public sector’s salaries by more than six percent. The pensions should be indexed based on the ‘Swiss’ formula, i.e., meaning an increase of 5.5 percent.