Republic of Serbia BILATERAL SCREENING Chapter 17 Economic and monetary policy. National Budget Framework and Economic Policy Coordination

Transcription

1 Republic of Serbia BILATERAL SCREENING Chapter 17 Economic and monetary policy National Budget Framework and Economic Policy Coordination

2 Budget Process Regulations The primary law that regulates the entire budget process is the Budget System Law Fiscal Strategy is a document adopted by government, that defines the mediumterm fiscal and economic policy Until 2009 document name was Memorandum on budget and fiscal and economic policy Other important budget process and budget framework legislative: - laws regulating tax system (tax coverage, rates, exemptions etc) - laws regulating specific types of expenditures (wages, pensions, social assistance, subsidies etc) - Public Debt Law - Law on Local Self-government Financing etc. 1/16

3 Budget System Law BSL regulates Budget preparation, planning, adoption, execution, accounting and reporting. BSL prescribes fiscal principles, rules and procedures aiming to ensure long-term fiscal sustainability BSL also regulates budgetary process for all levels of General Government BSL, inter alia, defines: - budget calendar - fiscal rules - Fiscal Strategy contents and adoption process - Fiscal Council jurisdiction, arrangement etc. 2/16

4 Fiscal Strategy Fiscal Strategy represents a crucial economic document adopted by the Government encompassing key fiscal and economic policy guidelines in the medium (three year) term. The Government adopts the FS twice a year in spring and in the autumn (revised FS) Fiscal framework presented in FS refers to General Government Republic Budget, Local Self-government, financial plans of Social security organizations and financial plans of road fund companies PE Putevi Srbije and Koridori Srbije 3/16

5 Fiscal Strategy Fiscal Strategy is comprised of three main parts - macroeconomic and fiscal framework - public debt strategy - structural reforms FS gives the framework for the following year Budget. Minor deviations occurred during the budget law adoption are always possible. FS is the basis for part 1 of National Economic Reform Programme (NERP), while macrofiscal framework given in FS should be the basis for part 2 of NERP 4/16

6 Fiscal Rules Fiscal rules were introduced in 2010 There are general and specific fiscal rules General fiscal rules are regulating public debt and fiscal balance targets: - general government debt may not exceed 45% of GDP (not including restitution liabilities) - medium-term annual fiscal deficit target at 1% of GDP - law provides specific formula for fiscal balance targeting taking into account: previous fiscal balance, long term fiscal target, long term potential growth and growth projection. - at the moment targeted fiscal balances in medium term are lower than those given by formula due to the necessity for faster debt path stabilization. Specific fiscal rules: - fiscal rules regulating general government salaries and pensions: general government salaries may not exceed 7% of GDP pension expenditures may not exceed 11% of GDP - fiscal rules regulating local self-government: deficit allowed for capital investment only deficit limit 10% of revenues 5/16

7 National Economic Reform Programme First Economic and Fiscal Programme (EFP) was submitted to European Commission in 2006 Since 2012, when Serbia was granted candidate status, Serbia is submitts Preacession Economic Programme (PEP) Since 2015 Serbia is required to submit National Economic Reform Programme (NERP) Part 1 of NERP is not substantially different from PEP, while part 2 is focused on improved competitiveness and business environment The differences between part 1 of NERP and FS: - alternative macrofiscal scenario - detailed explanation of monetary policy - some chapters have been shortened (e.g. public debt strategy) 6/16

8 NERP part 2 Task force established National coordinator Ministry of Finance All relevant institutions participated (ministries, NBS ) Macrofiscal framework from part 1 Document based on NAD Recommendations from SIGMA representatives incorporated 7/16

9 Macroeconomic and fiscal projections Official macroeconomic projections presented in FS are made by Ministry of Finance, taking into account standpoint of all other relevant institutions Projections are based on historical data series (source: Statistical Office, Central Bank of Serbia (NBS), Ministry of Finance etc.) Macroeconomic forecasts are made in collaboration with NBS (exchange rate, inflation...) Fiscal projections are produced on the basis of: - envisaged economic policy - macroeconomic framework - public debt trends - fiscal rules - present and planned changes in tax policy - regulations for specific categories of expenditures (wages, pensions, social welfare, subsidies...) 8/16

10 Public Debt According to the Public Debt Law (central Government level) Public Debt of the Republic of Serbia consists of: Direct liabilities of the Republic arising from securities and agreements entered into by the Republic Guarantees issued by the Republic for local governments and legal entities founded by the State Ministry of Finance RS uses the metodology which icludes all guarantees no matter if they are financed from the Budget or by beneficiaries. According to Budget System Law, with regards to fiscal rules, general government debt includes non guaranteed debt of local governments but excludes restitution liabilities The Republic may borrow to cover budget deficit, liquidity deficit, to refinance public debt, to finance investment projects and to cover liabilities arising from issued guarantees. Pursuant to the Law, public debt is an unconditional and irrevocable obligation of the Republic and is prioritized over other public expenditure provided for by the law governing the national budget. 9/16

11 Public Debt Management Public Debt Administration, responsibility and organization in order to implement the Public Debt Management Strategy, recording and servicing obligations arising from borrowing Main Public Debt Management Principles: to ensure financing of Serbia`s fiscal deficit, including both the short-term (liquidity) and longterm deficit, as a part of the policy aimed at maintaining the public finance system stability to define the acceptable level of risk, which should be determined as a targeted debt portfolio structure in terms of currency structure of debt, interest rate structure, maturity structure and debt structure by types of financial instruments to support the development of a market for government securities issued in domestic and foreign markets the borrowing process should be transparent and predictable Debt management strategy part of Fiscal strategy General fiscal rules and debt reduction programme also part of Fiscal strategy 10/16

12 Structural Reforms Structural reforms as a part of FS are done in collaboration with relevant line ministries that contribute by submitting reform plans regarding key policies Structural reforms must be in accordance with the overall fiscal and economic policy Assessed effects of structural reforms and measures must be in line with medium term fiscal framework Most important mid-term structural reforms are: - business environment improvement - public sector reform - reforms with significant fiscal impact 11/16

13 Reporting Public revenue, expenditure and fiscal balance reporting is being produced for the level of general government, monthly, according to GFS methodology, on cash basis Reports are preliminary and do not include data for own resources of part of indirect budget beneficiaries and extrabudgetary funds (except for Road Fund (PE Putevi Srbije and Koridori Srbije Ltd.)) For every fiscal year final budget statement is prepared and sent to the parliament in the form of law (including indirect budgetary beneficiaries) Also, consolidated budget report is adopted by the Government including all levels of government with indirect budget beneficiaries, but without extrabudgetary funds 12/16

14 Reporting Improvement In the following period further work on improvement of interim reports is necessary as those should include own resources of all indirect budget beneficiaries and extrabudgetary funds Other important issue is improving of ESA methodology reporting and submitting of EDP tables (Statistical Office of RS) For the NERP purposes (ANNEX tables) general government revenues and expenditures reports are recalculated in accordance with the ESA methodology, but on cash basis and without indirect and extrabudgetary funds 13/16

15 Collaboration with European Commission Since 2006, the Government submitted a mid-term economic document Based on the assessment and recommendation by the EC the document was improved regarding the following: - potential output and cyclically-adjusted fiscal balance - alternative macroeconomic and fiscal scenario - quantification of the economic impacts of structural reforms - fiscal risks In all above mentioned areas future improvement is expected Twice a year the representatives of MoF and NBS discuss macroeconomic and fiscal projections from the NERP with the EC representatives 14/16

16 Compliance with Directive 2011/85 There is a basic compliance with Directive 2011/85, but still there is a major improvement needed Accounting and statistics although there is a detailed and regular reporting on a monthly basis at the general government level, it is necessary to define the scope of general government in order to include all the entities and to further develop the reporting based on the ESA methodology Projections it is necessary to develop advanced forecasting and simulating tools and improve capacities in order to fulfil the ever growing and more complex tasks Fiscal rules there is a revision needed, having in mind that the real figures surpassed the level defined by the rules in the first year of implementation already Medium-term budget framework frequent changes due to tax policy and expenditure policies, as well as different programs of fiscal consolidation in recent years General government finace transparency and appliance of budget framework there can be no progress in this field without the improvement of the above-mentioned processes 15/16

17 Independent Regulatory Agencies The two most important institutions regarding budget process are: - State Audit Institution the highest authority for auditing of public funds in the Republic of Serbia - Fiscal Council its mission is to assess the credibility of the fiscal policy 16/16

18 Thank you for your attention QUESTIONS? 11/12