Standpoint of the NBS as of 30 September 2009 on the Proposed Public Administration Budget for 2010 – 2012
The Standpoint expresses only the first opinion on the public administration budget as a result of the fact that the National Bank of Slovakia (NBS) has not had sufficient time for the assessment and analysis of the effects and consequences of this proposal. The Standpoint arises inter alia from the joint standpoint of the Governors of the euro area as of 3 September 2009.
It is vital in order that the obligation of the government of the SR to return to sound and sustainable public finance will be confirmed in the coming years, in full compliance with the Stability and Growth Pact. It is important so that the budget contains confidential consolidation strategies with the up-to-date structural provisions. The structural consolidation in the year of anticipated recovery, i.e. in 2010, should be considerably higher than 0.5%, in a country with a high deficit of at least 1%.
The gross debt of public administration in the Slovak Republic in 2009 belongs among the lowest in the European Union. The deficit of the year 2009, amounting to 6.3%, is comparable with other countries of the European Union in this crisis period although, in accordance with the submitted material, a cumulation of deficits rapidly increases indebtedness, while the debt should grow to 33% in 2009, to 40.8% in 2010 and to 42.5% in 2011. The value of the above-stated debt in 2010 would not probably worsen the evaluation of the Slovak Republic in the financial markets.
With regard to this indebtedness development, the NBS recommends a faster consolidation, to the extent of 1% minimally.
Regarding incomes the NBS considers the proposal achievable, with the risk in the area of settlement of non-tax incomes. With regard to expenses the NBS positively evaluates the savings in the amount of EUR 760 mil. However, it is important to keep these savings sustainable and accompanied with structural provisions which have not been possible to assess considering the shortness of time.
Another risk of the budget proposal is the possibility of the drawdown of eurofunds and the increase of internal debt, mainly in the health service, which can take the form of explicit debt in the upcoming period.
From the point of view of medium-term to long-term sustainability it is necessary above all to sustain the stable primary balance of the public finance on the level of the year 2008 in order that the government of the SR will be able to sustain the current rate of government indebtedness in the medium-term.
The aim of the government should be to sustain the rules of the Stability and Growth Pact, which means the aim of a zero structural deficit in the long-term.
National Bank of Slovakia
Imricha Karvasa 1, 813 25 Bratislava, Slovak Republic
Tel.: +421-2-5787 2168,+421-2-5865 2168, +421-2-5787 2169, 421-2-5865 2169
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