MPs change 2020-2024 budgeting framework to allow higher expenditure

Ljubljana – As the country continues fighting the epidemic with a number of measures, parliament endorsed on Friday the government’s proposal to raise the public spending ceiling for the period until the end of 2024. Considerably higher expenditure is planned for 2021, to be followed by a gradual decrease.

The expenditure ceiling for this year will rise from EUR 24.9 billion as set last November to EUR 25.3 billion, putting the general government deficit at 8.6% of GDP.

The upper limit to budget expenditure will be by EUR 800 million higher, reaching EUR 14.32 billion, with the budget deficit at 8.6%.

“This will enable further smooth financing of all measures set down in emergency coronavirus laws,” Finance Minister Andrej Šircelj said before MPs passed the changes to the budgeting framework for 2020-2022 and 2022-2024.

He said that when drafting the 2021 budget, the impact of all measures on public finances could not have been anticipated while the macroeconomic forecast also changed.

In the following years, the general government deficit would gradually fall – in 2022 to 5.7% of GDP as the expenditure ceiling is planned at EUR 25.050 billion.

The figure will drop to 3.8% in 2023 against the expenditure ceiling of EUR 25.045 billion and to 2.8% in 2024 when the maximum expenditure will be EUR 25.430 billion.

Budgetary deficit would be falling accordingly: in 2022 to 4.9% of GDP as expenditure is capped at EUR 13.30 billion, to 3.6% of GDP in 2023 with EUR 13.06 billion in expenditure, and to 2.5% of GDP in 2024 when spending reaches EUR 12.75 billion.

Šircelj said the documents for the coming years had been prepared at a time of great uncertainty, which was however decreasing as more people got vaccinated, which bode well for the coming years, especially 2023 and 2024.

He hopes the European Commission will extend the suspension of debt rules so that in 2022 the strict fiscal rule of balanced budged would not have to be observed.

Coalition MPs as well as the opposition DeSUS and SNS announced their support for the proposal in the debate, the opposition SD, LMŠ in SAB said they would vote against, and unaffiliated MPs would abstain.

Coalition MPs said that higher spending to support businesses and households was urgently needed and that the government acted properly and effectively in that respect.

The centre-left opposition meanwhile highlighted the steep rise in debt and in expenditure which is not directly linked to the epidemic. It also argued it was not clear what financial impact the planned tax reforms and the introduction of the cap on social security contributions would bring.

Jožef Horvat from the coalition New Slovenia (NSi) said the measures were necessary and that they had brought tangible results, so it was urgent to keep providing support and stimulus until economic recovery was solid enough. He believes the general government debt will be manageable if the money is spent wisely.

Robert Polnar of the opposition Pensioners’ Party (DeSUS) argued nobody knew what an optimal ratio between expansive and restrictive fiscal policy was, but argued in favour of minimising the damage of the epidemic.

Alenka Bratušek from the opposition SAB said “the numbers were written down so that you can continue spending taxpayer money without oversight”. She argued the 2022 documents showed pension funds would drop by EUR 230 million, which called for lowering pensions.

The minister denied the claim, saying the planned expenditure for pensions would rise, this year by 5.9% and by 2-3% in the coming years.

Igor Peček from the opposition Marjan Šarec List (LMŠ) criticised the documents as irrational financial policy which would not only impoverish the state budget but also the pension and health budgets, while the planned income tax changes would result in less revenue for municipalities.