Min­istries given bud­get ceil­ing in new fis­cal pol­icy

Financial Mirror (Cyprus) - - FRONT PAGE -

Gov­ern­ment min­istries will no longer be able to de­ter­mine their yearly bud­get on their own, as the Anas­tasi­ades ad­min­is­tra­tion has de­cided to put a ceil­ing on amounts al­lo­cated to each min­istry prior to the bud­get plan­ning stage.

Fi­nance Min­is­ter Har­ris Ge­or­giades said af­ter a cabi­net meet­ing that this is part of the gov­ern­ment’s fis­cal strat­egy which is the gen­eral frame­work in which in­di­vid­ual poli­cies and de­vel­op­ment plans will be pro­moted in all pol­icy ar­eas and min­istries.

“We now have a bud­get preparation process in each min­istry so that in Septem­ber we have the bud­get ready and put to the Par­lia­ment,” said the min­is­ter.

Ge­or­giades said that the process in­volves the gov­ern­ment cal­cu­lat­ing rev­enues “and there­fore how much you have to spend, how much you al­lo­cate to each Min­istry who then plan their bud­get ac­cord­ingly,” he said, adding that this sys­tem of sim­ple logic con­trib­utes so that “we are safely within the lim­its of a bal­anced bud­get”.

He added that in fact, this strat­egy gen­er­ates small sur­pluses. “We spend what we col­lect. Noth­ing more, in or­der not to cre­ate ‘holes’ and deficits,” com­mented the Fi­nance Min­is­ter.

The change es­sen­tially means that min­istries prior to draw­ing up and sub­mit­ting their bud­gets will be given a ceil­ing by the Fi­nance Min­istry.

Sources at the in­de­pen­dent watch­dog Fis­cal Coun­cil con­firmed to the Fi­nan­cial Mir­ror that this is done with the aim of bring­ing about dis­ci­pline in the min­istries’ fi­nances.

The source added that, “they will be forced to sit down and plan their bud­get more wisely. Also, with this mea­sure, bud­gets must be project-based, tak­ing in con­sid­er­a­tion the true needs of a given min­istry”. If bud­gets sub­mit­ted are be­low the ceil­ing, then th­ese bud­gets will be au­to­mat­i­cally ap­proved, the source ex­plained.

How­ever, min­istries will have some flex­i­bil­ity in go­ing above the limit. As ex­plained, al­though the Fi­nance Min­istry would want to keep a tight leash on min­istries’ bud­gets, they will be able to ap­ply for more fund­ing as long as they do not break the 3% deficit rule set by the Maas­tricht Treaty.

Fur­ther­more, any ex­pan­sion must not be at the ex­pense of the gov­ern­ment’s Medi­umTerm Ob­jec­tives agreed with the EU. Th­ese ob­jec­tives fore­see that a mem­ber-state’s debt must not ex­ceed 60% of GDP, must re­duce the debt within the agreed an­nual per­cent­age, and to be ex­pected to be in a po­si­tion to re­duce it even fur­ther in the fol­low­ing year ac­cord­ing to es­ti­ma­tions made. Sanc­tions are fore­seen for any mem­ber state which does not com­ply.

In or­der not be sanc­tioned by the EU, a mem­ber-state must com­ply with at least one of the above goals.

“The real ques­tion of course is how bind­ing th­ese rules are. There are coun­tries such as Italy which have not been com­ply­ing for years and have not been sanc­tioned”, com­mented the Fis­cal Coun­cil source.

Even the EU is con­sid­er­ing chang­ing th­ese rules.

“They are play­ing with the idea that an elected gov­ern­ment should put for­ward a bud­get for the whole term,” the source added.

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