Transcript Извештај о раду Министарства финансија у првих 100 дана Владе

Report on
Work of the Ministry of Finance
in the First 100 Days
of the Government
Belgrade, 24 October 2008
OVERALL RESULTS
- Fiscal policy until 2011 defined • Proposed Law on Amendments and Changes to 2008
Budget Law adopted;
• Memorandum on the Budget and Economic and Fiscal
Policy for 2009, with projections for 2010 and 2011,
adopted;
• Preparation of 2009 budget, proposed new laws and
bylaws is underway, as well as advancement of the
existing ones.
OVERALL RESULTS
- Fiscal policy is based on assessment of
macroeconomic tendencies – Average growth rate over the past three years was 6.5%, 7%
growth is expected this year
– The growth is relatively widely diversified (large number of
branches has average and above-average growth)
– Exports grow at around 25% rate and are also widely diversified
– Inflation has slowed down (September retail prices index was
9.5% yoy);
– ...but we should not forget about the BOP deficit
– Positive tendencies in Serbian economy are expected to
continue, despite the global financial crisis (recession in Serbia
would not mean zero or negative growth, but a 4% growth)
OVERALL RESULTS
- Estimated growth of basic macroeconomic
indicators, % 2008
Real GDP growth
7.3
Increase in exports of goods, denominated in euros
20.5
Increase in imports of goods, denominated in euros
22.4
Current account deficit, donations excluded, % of GDP
-18.4
Real growth of investment into fixed assets
12.3
Inflation, end of period
9.5
Unemployment rate, (ILO definition)
18.6
Real growth of average net wage
6.0
Labor productivity growth
6.9
OVERALL RESULTS
- Reasons for budget revision• Reporting fiscal result in line with the GFS
international standard (which had not been applied
before) that allows making comparisons with other
countries
– Citizens of Serbia should be aware of the fiscal burden and real
costs
– Please note:
• The former methodology, on average:
– overestimated regular revenue;
– underestimated regular expense;
– made overall fiscal result slightly better, but the discrepancies
are not dramatic!
• Revenue higher than planned (unexpected luck)
• A changed structure of expenditure, because the
new government has new priorities
–
–
–
–
accelerated building of infrastructure,
financial incentives for strategic investment,
improving the situation of pensioners,
financial support to talented persons etc.
• The Revision aligns revenue and expense with
developmental and social priorities of the new
Government
• A balance has been achieved between social and
developmental objectives, while macroeconomic stability
was not additionally jeopardized
• Proposed Revision is a reasonable compromise in given
political circumstances (reasonable, because fiscal rules
were observed!)
2008 Budget Revision
2008 Budget Law
Law on Changes and
Ammendments to 2008
Budget Law
Increase /
Decrease
A Total revenue (I+II+III)
639,600.3
650,174.3
10,574.1
I Current revenue (1.+2.)
639,600.3
650,174.3
10,574.1
1.Tax revenue (1.1+…+1.6)
596,179.1
606,464.9
10,285.8
1.1. Customs duties
61,584.7
70,447.7
8,863.0
1.2. Income tax
72,000.0
76,046.6
4,046.6
1.3. Profit tax
34,024.4
36,087.1
2,062.7
1.4. VAT
311,493.5
315,642.2
4,148.8
1.5. Excises
111,274.7
102,314.9
-8,959.7
5,801.9
5,926.4
124.5
43,421.1
43,709.4
288.3
B Total expense and net borrowing ( I+II+III)
680,548.8
695,959.1
15,410.3
I
588,551.3
614,854.5
26,303.2
1.6. Other taxes
2. Nontax revenue
Current expense (1.1-1.8)
1.1 Wages and salaries
149,374.5
150,362.4
987.9
1.2 Social contributions (412)
27,448.9
27,251.6
-197.3
1.3 Procurement of goods and services
45,714.8
45,900.3
185.4
1.4. Interest
16,957.0
16,437.2
-519.8
1.5 Subsidies
39,571.9
48,469.4
8,897.5
1.6 Social assistance benefits
1.7 Transfers to other governmental levels and
MSSO
66,703.2
68,119.3
1,416.1
232,762.8
247,089.1
14,326.3
1.8 Other current expense
10,018.3
11,225.2
1,206.9
II
65,877.8
59,058.1
-6,819.7
26,119.6
22,046.4
-4,073.2
-40,948.5
-45,784.7
-4,836.3
III
Capital expense
Net borrowing
IV Surplus / Deficit (А - B)
Financing of the Republic of Serbia
deficit and debt repayment in 2008
dinars, millions
2008 Budget
Law
Law on Changes
and
Amendments
to 2008
Budget Law
1. Funds needed
-89,306.2
-92,118.8
1.1. Budget deficit
-40,948.5
-45,784.7
1.2. Repayment of principal
-48,357.8
-46,334.1
2. Financing
89,306.2
92,118.8
2.1. Deposit decrease
30,000.0
30,000.0
2.2. Current receipts from privatizations and bankruptcies
35,000.0
35,000.0
2.3. Net borrowing
24,306.2
27,118.8
• Total revenue grew by 0.4% of GDP, from RSD639.6
billion to RSD650.2 billion (mostly due to better than
expected revenue from personal income tax, profit tax
and customs duties)
• Total expense rose by 0.6% of GDP, from RSD680.5
billion to RSD695.9 billion (mostly due to increased
subsidies, higher expenditure on pensions, accelerated
payment of unemployment benefits)
• Total budget deficit increased by 0.2% of GDP, from
RSD40.9 to RSD45.8 billion
• Fiscal policy did not become significantly more
expansive with this Revision!
OVERALL RESULTS
- FISCAL POLICY EVALUATION • It was man-made, therefore, it is not optimal: it is
procyclical, but sustainable (there is room for
improvements)
• Fiscal burden, public consumption and size of
the deficit are at the regional average (it is the
price of the balance achieved between
developmental and social objectives of the
government)
• Finally, basic fiscal rules were observed:
• The deficit is not excessive
– Deficit exceeding 3% of GDP is considered
excessive, according to the Maastricht Treaty
– Fiscal deficit can be higher if …public
investment are higher today, but are expected
to decline in future
Golden rule : The state borrows only to
invest, but not to finance current consumption;
and
Sustainable investment rule: public debt as
percentage of GDP should be at a stable and
prudent level; though the referent value is
below 60%, the desirable number would be
40%
OVERALL RESULTS
- Fiscal and monetary policy coordination • The Ministry of Finance, in coordination with the National Bank
of Serbia, monitors on a daily basis potential overflow of the
global financial crisis on Serbian economy
• At the proposal of the Ministry of Finance, the Government has
changed several laws, whose application will moderate any
negative consequences, primarily:
– Deposit Insurance Law
– Law on Bankruptcy and Liquidation of Banks and Insurance Companies
– Law on Deposit Insurance Agency
OVERALL RESULTS
- Fiscal and monetary policy coordination • Basic changes are in line with EU directives:
– Definition of insured deposit expanded (beside private deposits,
SME deposits are also included)
– Insured deposit amount increased from EUR3,000 to EUR5,000 per
depositor, per bank;
– The activity of Deposit Insurance Agency expanded to the entire
banking sector (up until now, it focused on state-owned banks
only)
– Beside the previous method of covering potential losses
(swapping for treasury bonds), providing swift liquidity, i.e.
recapitalization, is also envisaged
OVERALL RESULTS
- Financial market development • The Ministry of Finance will encourage development of the
domestic financial market with a substantial bond issue to
– reduce borrowing abroad
– strengthen monetary policy efficiency
– stimulate saving
OVERALL RESULTS
- Financial market development • Certain measures that were announced earlier are underway,
their objective will be to promote saving and help financial
market development:
– Suspension of tax on revenue from saving interest (or a
considerable reduction, in any case)
– Abolition of capital gain tax and transfer tax on securities trading,
in order to support development of the domestic financial market
OVERALL RESULTS
- Unilateral implementation of Interim
Agreement with the EU member states • Implementation of Interim Agreement on trade and traderelated matters is to start as of 01 January 2009;
• The objective is to reduce the time that needs to pass
between the start of implementation of the Interim
Agreement and granting of the candidate status;
• Full trade liberalization will be completed within six
years, by 01 January 2014;
• The pace of liberalization may be accelerated,
depending on economic situation.
OVERALL RESULTS
- Unilateral implementation of Interim
Agreement with the EU member states • For the economy, implementation of the agreement
means the possibility to import industrial and agricultural
goods originating in the EU duty-free or by paying lower
customs duties than those stipulated by the Customs
Tariff Law;
• For agricultural products (because of their importance) a
slower tempo of trade liberalization is envisaged
– around 35% of agricultural products can be imported duty-free
immediately after start of implementation of the agreement, while
the pace of trade liberalization for other products will develop in
line with the dynamics stipulated by the agreement.
OVERALL RESULTS
- Unilateral implementation of Interim
Agreement with the EU member states • Degree of liberalization will be higher for industrial products,
and customs duties will be lowered in line with the dynamics
envisaged in the agreement :
2009
2010
2011
2012
2013
2014
non-sensitive, sensitive
products
70%
40%
0%
0%
0%
0%
highly sensitive products
80%
60%
40%
20%
0%
0%
extremely sensitive products
85%
70%
55%
40%
20%
0%
• For proper application of the agreement, the Ministry of
Finance has prepared an Instruction that contains tariff
classification and respective customs duties, which will be
published on the MoF website.
OVERALL RESULTS
- other legislative projects • Over the past three months, a number of agreements
with international financing organizations concerning
borrowing, guarantees and donations were ratified:
– International Bank for Reconstruction and
Development
– International Development Association
– European Investment Bank
• Worth around EUR500 million
• Public Procurement Law
– There is no perfect law; a law can always be
subject to criticism (that is why they are often
changed, particularly during transition)
– It is aligned with EU directives and will lead to
saving in the state coffers
• Securities Law
– Trading in shares of companies undergoing
privatization is facilitated
– Changes provide for attaining a better price
– Financial reporting is simplified and costs of
notification of participants are cut
– Broker-dealers will execute their clients’ orders more
swiftly
– Stockholding companies with majority share in
socially-owned/public property undergoing
privatization may offer their shares on the organized
market
OVERALL RESULTS
- Organizational reform • Establishment of Public Debt Administration and Free
Economic Zones Administration
• Establishment of organizational units for implementation
of IPA funds
• .....
OVERALL RESULTS
- Future steps • An IMF program is planned
• The program will involve minimum expenses for the state,
while bringing substantial benefits
– Support in economic policy management in uncertain conditions
will
• make fiscal policy sustainable in the long run
• set limits to increase responsibility regarding spending, wage
agreements and productivity
OVERALL RESULTS
- Future steps – The way to secure enhanced credibility of the state (with a firm
program, Serbia would demonstrate that the risk is lower than in
other countries and would be able to receive cheaper loans,
primarily from international financing institutions, for infrastructure,
but also for finalization of restructuring and privatization)
– Accelerate EU accession process (Serbia is currently in a vacuum:
it neither has a program, nor did it qualify for IPA programs)
– The program by itself is not sufficient to calm the market down, but
in conjunction with other measures, it would make a good cocktail
• Tax system reform related with taxation is
planned to continue: personal income tax,
capital gain tax and securities tax, excise on
cigarettes and oil derivatives, profit tax,
administrative fees;
• The customs system is changing toward
unilateral implementation of the SAA and cutting
the customs duty on cars to 10%.
Thank you for your attention
20 Kneza Milosa
011 3642 626
[email protected]