A very dark place
On the last day of January, Transparency Serbia announced that our country ranked 62 nd in the big international Open Budget Index survey for 2016. The list covers 115 countries, which means that we are in the bottom half. However, even more troubling is the fact that Serbia has dropped 15 places in the ranking since 2015, when it ranked 47 th out of 102 countries.
We should use this as a convenient occasion to remind ourselves of an interesting talk given by Vladimir Vuckovic, a member of the Fiscal Council, at the economists’ seminar at the end of December last year, which remained largely unnoticed in the general pre-New Year’s rush. Along with some (sincere and well-deserved, of course) praise of the public finance consolidation and decrease of the fiscal deficit, Vuckovic explained the budget in detail and elaborated on the drawbacks of the process of its adoption, content, and control over the execution of planned (para)state revenues and expenditures. Here’s what Vuckovic said.
Firstly, the most important documents are presented to the public, and then adopted in the National Assembly with a (significant) delay. For example, the draft law on the budget should be submitted by the Government to the National Assembly in early November, but it was done no earlier than December. There is even greater delay when it comes to the key mid-term planning document – the Fiscal Strategy draft. It should have been sent to the Fiscal Council in April, while, in reality, it was delivered in December.
Second, there is still no central register of public sector institutions and employees. A large number of agencies and institutions, which by their nature belong to the central government, are not included in the budget (the National Agency for Housing, Agency for Accreditation of Health Institutions, Transport Safety Agency, Energy Agency, Securities Commission, Regulatory Agency for Electronic Communications and Postal Services, Regulatory Authority for Electronic Media). Also, the list of employees is still not finished and not included in the budget process. Do you remember how much Kori Udovicki struggled to do this? Since she left – and was replaced by, do I need to remind you, the current Prime Minister Ana Brnabic – this effort was entirely halted.
Third, some significant expenditures are still not transparent. For example, the public is only shown the total expense for the so-called activated guarantees (20-30 billion dinars), but there are still no data on companies whose expenditures are repaid from the budget, nor about the amounts spent on individual companies. Also, only the total expenditures for subsidies given to investors (which grow each year, despite the protests by the local economic and professional public) are shown, but we still don’t know which company received which amount.
Fourth, late payments are not monitored. Reports on late payments do not cover all budget users, nor are available data reliable. It is clear that large expenditures in healthcare, agriculture, and so-called “recyclers” are late … And when late payments outgrow the capacities of budget users, the cost is transferred to the state budget.
Fifth, the so-called current budget reserve, which is intended for emergency situations (costs), keeps increasing to enormous amounts. Until 2016, it was kept within the usual limits of about one percent of budget revenues. It’s been growing ever since and reached four percent of budget revenues in 2017, i.e. about 45 billion dinars. On the one hand, this allows the government to spend large sums of money at its sole discretion, without being held accountable, but, on the other hand, virtually eliminates the need for legal rebalances during the year.
Sixth, the Ministry of Finance has no way of assessing the objectivity of budget users’ demands, and many, of course deliberately, exaggerate their needs. This results in „approximate” budget shares, which, in other words, means an unjust and irrational distribution of funds.
Seventh, mid-term goals set in the Fiscal strategy are mere formalities, without any real importance.
Eighth, parafiscal charges are introduced with no control. They are set by local governments, the state, state enterprises, funds, and other institutions. And there are no effective counter-measures.
Ninth, huge budget spending in December has already become a regular phenomenon. During the last month of the year, almost the same amount as in the previous 11 months was spent. Hence, monitoring of budget implementation during the year becomes virtually impossible, or at least pointless.
And finally, tenth, and perhaps the most important: there is no budget financial statement. The Law on the Budget System stipulates that the financial statement of the budget for the previous year shall be submitted by July 15 th of the current year. However, the financial statement was last adopted in the Parliament in 2002 (was it during Zoran Djindjic’s time?) for 2001. After that – nothing. For the period from 2005 to 2014, one could find some proposals of the bill on the financial statement, but the legislators remained silent. There aren’t even draft financial statements for 2015 and 2016.
In the end, Vladimir Vuckovic concludes:
1) The budget process is superficial and non-obligatory; there are practically no mid-term and reform goals.
2) The budget is shady: it doesn’t provide an overview of all incomes and expenditures; all payments are neither planned nor paid. The budget reserve is huge, which means that state discretion in spending the taxpayers’ money is also huge. Furthermore, this implies that fiscal discipline is loose, which further implies that control over public funds is very weak.
3) There is no budget financial statement. The size of the public sector is unknown.
Let’s make all this even simpler. When everything is said and done, we don’t know what the state consists of – how many institutions and how many individuals. And second, we don’t know how much money the state takes, nor how much or how it spends.
The Serbian state is, to put it simply, a very dark place.
Translated by Marijana Simic
Peščanik.net, 16.02.2017.
