Transcript PREDSTAVITEV CELOSTNE GRAFIČNE PODOBE

MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
Towards (more) appropriate
fiscal policy in Slovenia!
(From Stimulus to Consolidation)
Slaven Mićković
Ministry of Finance, Republic of Slovena
Mednarodna konferenca UMAR, 20. junij 2011
7.7.2015
1
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Two Great Features of Budgeting
1. more efficient use of scarce public
resources and
2. well-targeted expenditure.
7.7.2015
2
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Efficiency and effectiveness of public
spending are not necessarily supportive to
growth!
• Fiscal policy is not only an instrument of
macroeconomic stabilization but also an
instrument to achieve growth and poverty
reduction objectives.
• Although stability is necessary for growth,
it is not sufficient!
7.7.2015
3
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• During the budget preparation process,
attention has to be focused on the likely
growth effects of the level, composition and
efficiency of public spending and taxation.
• Trade-offs and prioritization among programs
must be made to ensure that the budget fits
government policies and priorities!
• Appropriate budgeting method: Budgeting
with Impact which incorporates General
Equilibrium Analysis into the two-phase
performance budgeting!
7.7.2015
4
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• BwI will enable to find optimal level
and structure of expenditures by:
– min
T

 n
2 
 CF     macro _ indit  t arget _ of _ macro _ indit   
t 1  i1


– by changing level and structure of
expenditures
– subject to the expenditure ceilings (and
other constraines)
7.7.2015
5
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• BwI is a two-phased budgetary preparation
approach enforcing „Top-Down“ and
„Bottom-Up“ consistency.
• BwI enables the integration of economic
policy in budget preparation process
ensuring that expenditure programs are
driven by policy priorities.
• Introduction of BwI and improved fiscal
transparency can enhance fiscal credibility
and creditor confidence, and hence reduce
the public sector’s borrowing costs, thereby
increasing its borrowing capacity.
7.7.2015
6
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• BwI supports different types of
budgets according to the budget
structure, level of preparation and
government level.
• It supports multi-year budget
planning allowing different budget
scenarios and "what-if" analysis.
7.7.2015
7
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Fiscal Consolidation:
– Where (& why) are we now (d=5,5%BDP;
B=40%BDP)?
– Where we want to be (MTO)?
– What is our Fiscal Consolidation
Strategie?
d = 5,5% BDP
B = 40% BDP
7.7.2015
CONSOLIDATION
STRATEGIE
MTO
8
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Fiscal Consolidation:
– Most of the adjustment will have to stem
from fiscal structural reforms
– Some reforms should be initiated now
– Strengthened fiscal institutions can play a
key role in support of fiscal consolidation
– Adjusment should be more growth
friendly
7.7.2015
9
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
DEFINITION OF PUBLIC FINANCE EXPENDITURE CEILING
Macroec.
indicators
Public
finance
revenue
MtFS
model
Normative
restrictions
Budget
constrains
Public
expenditure
ceilings
Public finance
objective
(deficit, debt)
Economic
reality
7.7.2015
10
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Normative restrictions - The Stability
and Growth Pact (SGP) framework:
– Existence of an excessive deficit in
Slovenia
– Introduction of implicit liabilities into the
medium-term budgetary objectives
(MTOs)
7.7.2015
11
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
MTO values for Slovenia - EU Commission
methodology
MTO
Level of public
finance
balance that
stabilizes debt
level at 60%
GDP
Long-term
aging costs
(% GDP)
(3) = (1)+alpha*(2)
% GDP
% of total aging costs (a)
25%
33%
50%
66%
1
2
MF calculation of Jan 2011 (accepted pension
reform law taken into consideration)
-2.0
6.9
-0.3
0.3
1.4
2.6
MF calculation of Sept 2010 (pension
reform bill taken into consideration)
-2.0
5.8
-0.6
-0.1
0.9
1.8
MF calculation of Sept 2010 (w/o pension
reform bill)
-2.0
8.8
0.2
0.9
2.4
3.8
EU Commission calculation, updated
version 2009
-2.1
7.8
-0.1
0.5
1.9
3.1
EU Commission calculation, original
suggestion
-2.1
8.3
0.0
0.7
2.1
3.4
7.7.2015
12
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Budget constrains: timing / time
horizon is crucial at public finance
MTO setting – a newly appointed
medium term objective will have to be
put in an appropriate /realistic time
frame!
7.7.2015
13
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Economic reality:
– 3% deficit ceiling and the recommended safety
margins (m) help identify a natural and nontrivial limit of convergence for debt and primary
surplus ratios within the Stability and Growth
Pact,
– targeting deficit & debt at the same time allows
for the reconciliation of multiple policy targets,
such as safety, speed and quality of
convergence, whereas deficit benchmark
identifies a convergence path only by focusing on
one of the above criteria, namely safety!
7.7.2015
14
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Economic reality: country-specific
benchmarks which can guarantee
both stability and safety conditions
• Steady state target debt and primary
surples:
 1 g 
(0,03  m)
b  
 g 
*
7.7.2015
r  g
(0,03  m)
s  
 g 
*
15
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
Maximum general government debt that enables “close to
balanced or in surplus” budget position
g (trend GDP)
m (safety margin)
1.00%
1.10%
1.20%
1.30%
1.40%
1.50%
1.60%
1.70%
1.80%
1.90%
2.00%
2.10%
2.20%
2.30%
2.40%
2.50%
2.80%
2.90%
3.00%
3.10%
3.20%
3.30%
3.40%
3.50%
3.60%
3.70%
3.80%
3.90%
4.00%
73.43%
69.76%
66.09%
62.41%
58.74%
55.07%
51.40%
47.73%
44.06%
40.39%
36.71%
33.04%
29.37%
25.70%
22.03%
18.36%
70.97%
67.42%
63.87%
60.32%
56.77%
53.22%
49.68%
46.13%
42.58%
39.03%
35.48%
31.93%
28.39%
24.84%
21.29%
17.74%
68.67%
65.23%
61.80%
58.37%
54.93%
51.50%
48.07%
44.63%
41.20%
37.77%
34.33%
30.90%
27.47%
24.03%
20.60%
17.17%
66.52%
63.19%
59.86%
56.54%
53.21%
49.89%
46.56%
43.24%
39.91%
36.58%
33.26%
29.93%
26.61%
23.28%
19.95%
16.63%
64.50%
61.28%
58.05%
54.83%
51.60%
48.38%
45.15%
41.93%
38.70%
35.48%
32.25%
29.03%
25.80%
22.58%
19.35%
16.13%
62.61%
59.48%
56.35%
53.22%
50.08%
46.95%
43.82%
40.69%
37.56%
34.43%
31.30%
28.17%
25.04%
21.91%
18.78%
15.65%
60.82%
57.78%
54.74%
51.70%
48.66%
45.62%
42.58%
39.54%
36.49%
33.45%
30.41%
27.37%
24.33%
21.29%
18.25%
15.21%
59.14%
56.19%
53.23%
50.27%
47.31%
44.36%
41.40%
38.44%
35.49%
32.53%
29.57%
26.61%
23.66%
20.70%
17.74%
14.79%
57.56%
54.68%
51.80%
48.92%
46.04%
43.17%
40.29%
37.41%
34.53%
31.66%
28.78%
25.90%
23.02%
20.14%
17.27%
14.39%
56.05%
53.25%
50.45%
47.65%
44.84%
42.04%
39.24%
36.44%
33.63%
30.83%
28.03%
25.22%
22.42%
19.62%
16.82%
14.01%
54.63%
51.90%
49.17%
46.44%
43.71%
40.97%
38.24%
35.51%
32.78%
30.05%
27.32%
24.58%
21.85%
19.12%
16.39%
13.66%
53.28%
50.62%
47.95%
45.29%
42.63%
39.96%
37.30%
34.63%
31.97%
29.31%
26.64%
23.98%
21.31%
18.65%
15.98%
13.32%
52.00%
49.40%
46.80%
44.20%
41.60%
39.00%
36.40%
33.80%
31.20%
28.60%
26.00%
23.40%
20.80%
18.20%
15.60%
13.00%
7.7.2015
16
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Slovenian MTO basic principles :
– The MTOs must be country-specific and should ensure
credibility and ownership!
– Fiscal policy cannot be expected to cope with the full
structural effects of demographic aging.
– Fiscal policy surveillance in the context of SGP should aim
at fostering that countries respect the safety margin of
not breaching the 3% deficit threshold (i.e. lowering
debt): this concern should be the driving contribution of
fiscal policy to sustainability of public finances.
– The MTOs need a proper balance between explicit and
implicit liabilities.
– The MTO algorithms have to take into account adequacy
of pensions.
7.7.2015
17
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Similarly to credit ratings, the approach to
fiscal sustainability should be gradual:
– the contingent liabilities and the period over
which they are measured when included in the
MTOs should be shorter, for example next 10
years and not next 45 years,
– the resulting MTOs should be updated every 4
years for the next 10 years on a rolling basis,
– the MTOs should ensure that the safety margin
of not overcoming the 3% deficit as percentage
of GDP should not be breached.
7.7.2015
18
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Gradual approach of including contingent liabilities
provides more weight to the current fiscal stance
within a period where there is more certainty as to
the likelihood that contingent liabilities will turn
into explicit liabilities.
• The resulting MTOs will be consistent with the
following objectives:
– providing sufficient margin for not breaching the 3%
deficit-to-GDP ratio;
– keeping the debt below 60% of GDP;
– ensuring long-term fiscal sustainability;
– avoiding a distortive allocation of funds in the mediumterm based on high degree of uncertain liabilities.
7.7.2015
19
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Slovenian public finance MTO:
– Real budget deficit below 3% of GDP by the end of 2013;
– Cyclically-adjusted budget deficit below 1% of GDP by the
end of 2015;
– balanced çyclically-adjusted budget position reached by
the end of 2016.
• Additional restriction: public debt during the
consolidation phase must not exceed 45% of GDP,
target value of public debt is 40% of GDP!
7.7.2015
20
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Medium-term fiscal sustainability model
(MtFS model):
– MtFS model is designed on the idea of Hiebert
and Rostagno1 but restructured in such a way
that primary influence of cyclical economic
activity is transferred on revenue side, while
fiscal consolidation and restructuring is reflected
on the expenditure side.
– MtFS model is a powerful tool for fiscal policy
decisions which stimulate convergence and
determine a reasonable time horizon to achieve
fiscal goals.
1
Hiebert, P. and Rostagno, M. (2000), »Close to Balance or in Surplus:
A Methodology to Calculate Fiscal Benchmarks«, Fiscal Sustainability
7.7.2015
21
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• The number of expenditure equations in
MtFS model corresponds to the number of
government policies: control parameters [u,
v] are introduced for each policy of
expenditures for which measures of fiscal
adjustment are carried out
• Results of the MtFS model are:
– scenarios of different combinations and intensity
of expenditure cuts and reallocations,
– a time path for fiscal consolidation defining the
velocity of consolidation measures.
7.7.2015
22
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Basic principles beyond fiscal rule
construction:
– it is more important to decrease expenditure than to
decrease deficit,
– spending fiscal rule acts counter-cyclically,
– expenditure targeting improves financial planning of
budget users,
– fiscal balance (deficit) targeting includes risk of too
optimistic revenue forecasting,
– consolidated general government budget balance depends
on cyclical swings of economy,
– potential GDP growth is less volatile than actual GDP
growth and as such a better base for expenditure growth,
– structural deficit is an unobservable quantity and less
useful as a target.
7.7.2015
23
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Expenditure reaction rule:
Gt+1 = Gt × (1 + g*)
where g* is nominal growth of expenditures:
g* = gtrend - u×(bt - b*) - v×(ft - f*)
“preventive”
part
7.7.2015
“corrective” part
24
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• gtrend average of last three, current and three
forecasted potential GDP growths (%),
• b*
targeted/benchmark debt ratio,
• f*
targeted/benchmark primary balance ratio,
• u
the velocity of adjustment to the
discrepancy between the current and the
target levels of the debt ratio,
• v
the velocity of adjustment to the
discrepancy between the current and
the target value of primary deficit
7.7.2015
25
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Expenditures are supposed:
– to track the trend growth of the economy
– to be adjusted by a given percentage of
the difference between the current debt
ratio and the steady state debt target (u),
and by a given percentage of the
difference between the current primary
surplus ratio and its target ratio in the
long run (v)
7.7.2015
26
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Results:
1. MtFS model already in use
2. BwI still in progress
7.7.2015
27
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
General government revenues and expenditures in 2010-2015
20,000
19,000
Public expenditure
ceilings
mio EUR
18,000
17,000
16,000
15,000
14,000
2010
2011
2012
General Government Revenues
7.7.2015
2013
2014
2015
General Government Expenditures
28
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
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Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
General government deficit and debt in 2010-2015
0.0%
44.0%
2010
2011
2012
2013
2014
2015
43.0%
-1.0%
42.0%
-2.0%
41.0%
40.0%
-3.0%
43.3%
43.2%
42.0%
41.5%
-4.0%
39.0%
38.0%
39.9%
37.0%
-5.0%
38.2%
36.0%
-6.0%
35.0%
Public finance debt (% GDP)
7.7.2015
Cyclically-adjusted balance (% GDP)
Public finance balance (% GDP)
29
MINISTRSTVO ZA FINANCE
REPUBLIKA SLOVENIJA
DIREKTORAT ZA PRORAČUN
Beethovnova 11, 1502 Ljubljana, t: (01) 369 6470, f: (01) 369 6598, www.mf.gov.si, e: [email protected]
• Expenditure growth in consolidation period
Preventive
growth (gTREND)
2011
2012
2013
2014
2015
4.6%
4.4%
4.3%
4.7%
4.9%
7.7.2015
Growth
Correction
-2.4%
-3.1%
-1.6%
-1.8%
-2.0%
Primary
Expenditure
Growth
2.2%
1.2%
2.7%
2.9%
2.9%
30