Government budget projections for 2023: Who do they help, what do they change and why are they important to us?

Government budget projections for 2023: Who do they help, what do they change and why are they important to us?

If you are curious to analyze where the fiscal and budget policy changes for 2023, you should first compare the data of the fiscal tables, but rather the clarifications according to the relations of the draft budget for 2022[1] and the draft budget for 2023[2].

The same structure of the treatment of the areas where the budget aims, but moreover the text which is the same as for 2022 and for 2023, then you get to understand that the policies do not have an original approach. The debates that took place at the end of last year are enough to be copied and repeated with the new data so as not to tire any of the experts and those organizations that monitor the budget processing and public consultations.

In this budget, the same sentences are spoken about income, without any in-depth analysis or even at least any innovative approach from what has been written, proposed, discussed, presented:

from civil society,
from business organizations,
from media of any format and type,
from the demands of the experts themselves, or even
from the need for reflection because a new year will enter also carrying those that have not been done from previous years.

To create a perception that the budget for 2023 has a lack of depth in the description of new tasks and what was clarified last year is enough.

Realistically, the challenges and the analysis of the trends created in these last 3 years and the deepening of the governance performance based on the very critical challenges for the future are presented to citizens with little analytical data and qualitative findings.

The draft budget describes macroeconomic developments and fiscal policy in the same spirit as in the past, where optimization and the presentation of achievements has prevailed, without showing the other side of a critical approach, that of weaknesses, performance deficiencies and the reflection of comments of civil society, external audits, as well as of the business itself and their representatives.

The draft budget does not have reacted as far as it is related to the productivity of the reform of the finances of the public energy companies, which started years ago and has problems in its progress.

In the income analysis, a critical and exhaustive attitude is needed to reflect differently on the requirements for a balanced income tax system, both on labor and on capital, and a lot of other comments from all the interest groups.

It is necessary to present a serious and comprehensive political approach, to clarify how the government will fight tax evasion, considering in this case also the new revenue strategy.

Similarly, money laundering general directory does not appear to be presented with any countermeasure policies in reflection of the deepening money laundering situation of 2022, political initiatives for fiscal amnesty, etc., and following the summary of positions made public by foreign and domestic monitors and institutional organizations.

In the same way, deepening even further with new policies in the concessionary market is another detail that is quite necessary to be clarified already with a special report on the need for further deepening the prioritization of budget expenditures towards these schemes that do not enjoy the increased confidence of the public. Citizens no longer want to receive inadequate and ineffective public services that do not respond to their needs and priorities. Instead, they expect their demands and expectations to be considered in service delivery and flexibility by civil servants and public officials in this process.

The budget has an obvious approach as a function of electoral politics, without clarifying how public spending will go along the path required by the voters, who, through the voice of experts, demand that beyond electronic systems such as e-fiscalization, AFMIS/SIFQ[3] etc., a dialogue calendar of the 2022 and 2023 budgets is needed, which should accompany the draft budget, just like the fiscal package, and become a mandatory part to be considered.

When you see the repetition of the same vocabulary and spirit, you can perceive that it has not been reflected on what was requested by experts and all interested actors with written arguments, with meetings, with analyzes and studies, as well as through the media coverage of public opinion for a budget for the economy, the citizen, and the future.

In an initial reading of the fiscal tables that describes the prepared data, we as experts on fiscal policy and engaged in the public finance debate, that:

Saving money by spending less on infrastructure (no new costly contracts in the medium term) would be good for the budget’s fiscal performance, as the budget’s infrastructural developments to date have not helped the economy grow, other than survive without leaving budget space to invest in the diversification of the economy through the optimization of the generating resources of added value. Although the fiscal rule of the ratio of PPP costs to tax revenues is below the ceiling of 5%, in the dramatic fiscal period that is passing, the implementation of the budget must not go beyond the limits.

We find, according to the comprehensive analysis of budget expenditure, that there is little room for major cuts in public services. But, in the meantime, there is little transparency to understand administrative expenses in their effectiveness together with those accompanying e-government, which are already in a significant increase.
Spending on education, and especially vocational education, receives little budgetary attention, and it appears that budget allocations for defense this year exceed the concept of a good fiscal year.

We see that the budget does not have a complete social face, but an extended menu of expenditure items that fail to show (a) the vision of how social needs will be resolved, (b) how it will operate in the medium term with the vital minimum, or do not clarify (c) how the deficit of the special funds scheme will be addressed. In this case, there would be a space for debate about the private insurance market and its future, due to the lack of financial health for the needy. Better to phase out the generous bonus formula for pensioners that is considered good policy for increasing state pensions and raise money in more sensible ways through second and third column schemes and other schemes that are going places that have created a developed financial market. Meanwhile, in this case, all tax exemptions (tax expenses) for the needy classes, for economic sectors and for individuals should be repaired. For example, removal of the “non-significant” tax status for non-performing activities and sectors in these years. Meanwhile, exclusionary policies and tax rate cuts are undermining the health of the budget for the needy, as an income tax increase would be better than reinstating increases in national insurance contributions, which fall only on workers.

Political instability has completely infected the economy and daily life. Albania is still hit by the disappointing growth of the economy and the regional disparity in this development. But even though it has been presented that this frustration is hindered by chronic political instability and by the control of markets monopolized by a few individuals, it is seen that the budget not only has no spirit regarding this unequal distribution, but tries to through capital expenditures for road infrastructure, the waterworks, and the airport together with the railway projects keep blocked more than 65% of the entire budget for investments. The businesses developing them are understood to be the arbiters of government policy for 2023.

If we were a country where the full functions of the stock exchange and financial instruments were affected by budgetary policies in the same way as in EU countries, measures taken by the government with this level of arbitrariness would create market collapse due to of his reaction to the package of tax and public investment changes.

Public finances, with policies that don’t reflect year after year have gotten rid of most of the effect of tax cuts and have decided to redesign the government’s guarantee scheme for the price of energy from 2023. Decisions that should be taken to fill the huge hole in public finances are not being designed with the domestic market in mind.

Independent central institutions and the central bank are not expected to react to the draft budget differently than they have been acting for a long time, as a shield for politicians. By putting an end to the emergency purchase of treasury bonds, a good part of the budget is committed to paying the debts that the government and public energy companies take.

The problem of low growth is more entrenched by this draft budget. Political stability is a prerequisite for growth, not a sad thing to have. But, starting from the fact that the changes of the leader and the government are always around the level of maintaining the current political status quo, then even the individuals who change (regardless of age and personal history) create the feeling of suspense in the political and economic scene.

Although the 2023 budget aims for fiscal discipline to stimulate policy stability, this approach does not seem likely to boost growth by itself. The Ministry of Finance and Economy appears to have been working to balance the fiscal books as part of a soon-to-be-unveiled medium-term tax plan. But saving money by spending less on some budget items and giving increased weight to infrastructure does not seem to be better for fiscal statistics. The history of the exposure of the state budget 10 years ago with the nation’s road and infrastructure investments seems to resemble the current history, where in addition to the direct budget there are also mixtures of PPPs that extend over two decades, they will not help the economy to grow.

It is true that there is little room for major cuts in public services. But it is better to gradually phase out the outdated policy traded as “Albania 1 euro” type of tax breaks and easing policies and raise money in more reasonable ways: removing the preferential tax status for many current schemes for example, dividend and increasing inheritance taxes. An increase in income tax would be better than reinstating the rise in taxation of professionals, taxes which fall and burden only on labour. In the case of migration, the labor taxes should not be high for the long term. Instead, in fact the government, based on electoral needs has exempted small business, but without decreased before the informality.

But, when the economic and fiscal programs do not work, or are not programmed well, then the example of the British prime minister or many other similar examples should encourage the governing leadership to react in the same ways.

Ultimately, the Government Budget for 2023 should predict future revenues and expenses according to the citizen’s voice accompanied by the appropriate technical language from civil expertise. To put it simply, a budget that plans future savings and expenditures, as well as planned revenues and expenditures, according to political needs, but without reacting effortlessly to the reactions of the responsible part of society shows us that the face of citizens is little visible in the proposed budget for 2023.

[1] (Alb.) https://financa.gov.al/wp-content/uploads/2021/10/Relacioni-PB-2022-Final.doc
[2] (Alb.) https://financa.gov.al/wp-content/uploads/2022/10/Relacioni-PB-2023.doc
[3] Financial Information System of the Albanian Government

Share this post

Leave a Reply


error: