The budget should not change the target

budget target

The budget should not change the target

As countries move towards recovery for 2021, building strong institutions and capacity building will remain essential for Albania. Despite the fact that the years go by, the processes of strengthening the state are still those challenges that are carried year after year to burden the performance even with this big problem for our country.

The experts spoke, wrote, communicated, but the budget continued the calendar chosen by the government.

The 2021 budget, which has entered its finalization phase and will go for approval in early December, has been considered by its drafters and approvers as a complementary part of the government’s economic recovery goals by not excessive with increasing public debt. So, the focus will shift to the policies that are needed to support programmed economic growth while maintaining macroeconomic stability.

The crisis which seems to close the accounts with Albania by the end of this year or the first quarter of 2021 is not yet clear how and in what way it will release the economy by its trap. However, the 2021 budget offers an opportunity to move forward better by addressing cross-sectoral challenges such as better stimulation of the public health sector, as well as education by increasing the value of work (salaries) of public employees in these sectors.

The share of health expenditures in Gross Domestic Product for 2021 is estimated to be no more than 2.4% of it. If we include social support and former political persecuted aid, who are part of the Ministry, then this share amounts to 3.9% of GDP.

If we compare the current budget in the latest version (July 2020) with the budget to be approved for 2021 there is an increase of 3.6% in total for 2021. Expenditures on salaries, as well as other expenditures for necessary supplies will increase by 2.8% in 2021, while expenditures for hospital construction, restructuring and other medical facilities and equipment will increase by 19.8%.

The largest decrease is held by operating expenses with a decrease of 763 million ALL compared to 2020. The share of expenditures for education (excluding sports and youth) in Gross Domestic Product for 2021 is estimated to be no more than 2.4% of it.

If we include sports and youth that is part of the Ministry, then this share reaches 2.5% of GDP. If we compare the current budget in the latest version (July 2020) with the budget that will be approved for 2021, there is an increase of 1.6% in total for 2021.

Expenditures on salaries, as well as other expenditures for necessary supplies will decrease by 1.1% in 2021, while expenditures for school construction, restructuring and other facilities and equipment will increase by 37.2%.[1]

The crisis has unquestionably presented great demands for fiscal resources, which unfortunately were in short supply for 2020. The main reflection is facing the rapidly rising debt levels and declining fiscal space. Everything that has been programmed, worked on, managed and guaranteed in recent years, as a step forward has already been reversed and at the beginning of the year we are entering the debts are worse than a few years ago, both in terms of limited spending policy public, but also for the inflow of fiscal revenues. Beyond what is scheduled now and will change in the spring or mid-year, we taxpayers will hear again about the same excuses that have been repeated before. So, the budget, although it presents that it will do many things, will at least affect the increase of salaries of the two most sensitive and time-affected sectors: health and education.

Generating stronger, more resilient and inclusive growth requires that we should have invested in time and in all these years for them, for the future. This means investing in people, before evil and alarm start to fall, as in the meantime it is a wasted time that has no excuse for what will be done in the future. The investment that had to be made in people would affect a strengthening of the health system and the social protection system without leaving the situation to be justified with the occurrence of a natural and pandemic disaster.

But, in order to create this fiscal space, we should already be in time for the results from the fight against informality, translating into more money for the budget, but also into more formal and more consolidated market space to serve a sustained economic growth and untouchable by any subsequent disaster.

The main investments, beyond the needs for infrastructure and digitalization are those that should be made year after year, increasing human capital and increasing economic opportunities to expand market dimensions and competitiveness through diversification of the economy. And the latter in particular requires investment in education and training, in studies and research, as we look forward to advances in technology and understanding what this means for the future of employment.

Strong economic institutions and technical knowledge are essential for the design and implementation of labor policies. For example, to address debt problems and rebuild the fiscal space needs to modernize human capacities in the public and especially in tax administration, as well as strengthening their capacities focusing to cost efficiency.

In such a discussion, there is obviously a need for dialogue initiated by government with representatives of civil society, business organization, work organization and many other formal networks for a coordination of their demand with the possibilities and needs of a budget, well harmonized. In reality, the dialog with them is simply about the formal procedure and does not consider them as partners for better governance.

In this end of third decade of market economy, it is fact that budget is presented in an optimistic but not realistic way, at a time when analysts express doubts about realism of budget performance and revenues. We have been with too much dilemmas in the year 2020 which are part of lack of technical clarifications, for instance about the reasons of reducing the revenue and expenditure program, with the justification of limiting the budget deficit and a lack of analysis for the unexpected of performance of the management.

This dialog should not be allowed without a transparent analysis and public accountability for the budget governance model beyond the discussion of earthquake damages and bad impact of pandemic in economy.

What was done better than in a year without a pandemic situation and what was done worse?

Has the tax administration made mistakes in revenue management and cost efficiency?

Do the pubic need a clarification of the analysis of promises compared to budget possibilities and with the expected outputs from governance, as well as how much the situation and crises really affect its forecasts?

All these questions that need transparent and accountable analysis should be seen in the optics of a better level of politics about to non-repeat and to have a worse case of unjustified justification in facts and proper logic.

The Albanian economy, which was confronted with worst scenario almost for the most part this year, reacted in a chaotic manner and revealed structural weaknesses and the weak organization of its circulation chain.

The waiting-for-the end approach, to confront for the pandemic mostly with time passing and the allocation of funds only in last moments, mixed with the stagnation of the economy needs to be clarified if another bad scenario will happen this wintertime. People, or future patients need to be prepared not only for the bad economic time, but people should be assisted how to be self-healed with little cost. In this context the chain of health public services should be reformatted focused to prevention than to cure, because of budget limit for 2021.

Meanwhile, since the revenue administration does not seem to be able to quantify fiscal revenue based on  the flow of the money, as well as the circulation of goods and how it differs from the pandemic effects,  should be a clear note from Ministry of Finance of where to do the shifting of the tax burden during this period.

The budget fails to hold any year the same numbers that are forecasted and approved with legal and ethical arguments at the beginning of the year, but at least in this last decade it should say just one thing:

– Forgive us, if we slightly lower the target that we have badly forecasted in beginning of the year.

[1] as investment values ​​are small (as much as 10.5% of total expenditures for 2021), they do not increase the share of expenditures for the entire public education sector.

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