Macedonia's New Budget

A Gift or Yet Another Attempt at Plunder?

AIM Skopje, February 8, 2001

Recently, or more precisely on Jan. 31, Macedonia finally adopted its 2001 budget. Those who took part in its preparation claim it substantially differs from all past such documents. Globally, it "weighs" 83 billion denars, that is, DM2.6 billion (1 German mark equals 32 denars), and has never been as high since the country gained independence. Of this sum, 60.9 billion denars, or DM2,6 billion, belongs to the so-called central budget, regulating public revenue and expenditure, which is a major novelty. The rest covers individual budget funds for health care, pension and disability insurance, roads, protection of waterways, and so on.

The lion's share, 81.5 percent, is original budget revenue derived from customs duties and deductions paid by companies and individuals. Of this, almost 30 percent will be collected as value added tax (VAT), introduced last year and which provided for a big budget surplus. Foreign donations account for 1.7 billion denars, and 5.2 billion will come from loans approved to cover the expected deficit.

Officials of the Macedonian Finance Ministry say that the budget is for the first time part of a mid-term plan, that it was thoroughly balanced, relies on the treasury system, offers true opportunities for reform, initiates a new investment cycle, protects the poor, and ensures normal operation of the state apparatus. Current expenses are planned at 48.4 billion denars. For capital investment 1.5 billion is set aside, 1.8 billion is earmarked for a reform of public administration, and 15.7 billion for social transfers and reducing poverty. The 2001 budget has a 4.7 billion denar fund (DM150 million) for a possible excise tax reduction and slashing other fees in the second half of the year.

The country's major macro-economic document was passed in violation of all usual economic practices and logic requiring that it be determined at the end of the year, and in violation of Macedonian law. It, however, received the approval of the International Monetary Fund and the World Bank. It was urgently pushed through Parliament without any public debate, at a session which the opposition did not attend. It is interesting to note that PMs were offered two conflicting justifications of the budget, which caused numerous and fierce public reactions. The first explanation, elated and boastful, came from Prime Minister Ljupco Georgijevski, and the other was offered by Finance Minister Nikola Gruevski. The latter explanation lacked emotion but abounded in figures, warning of the need for financial discipline and of taxpayers' obligation to demonstrate more conscientiousness, adding also an explanation as to why a speedy rebalance was planned from the very outset.

According to Prime Minister Georgijevski the 2001 budget was "the most wonderful gift a reform-oriented government can offer its citizens and the economy." Using populist rhetoric, the first minister proudly said that a package of laws adopted to realize the budget and drawn up by his cabinet, will help reduce income and profit tax, as well as customs duty on 4,000 imported products. The economy and the population will thus "save" DM170 million to invest in private business, starting new manufacturing facilities and creating new jobs. He took the opportunity to boastfully add that this year's budget provides for lower salaries of public servants, and more money for construction of infrastructure and public interest facilities, that as of July taxes and deductions will be further lowered, and that a good portion of money received from the recent sale of the national telecom, some DM200 million, will be used to the benefit of all inhabitants of the country. He also promised other systemic measures to provide for the blessings of reforms to be felt even by those who, because of them, have been completely ruined.

Finance Minister Nikola Gruevski recalled that the 2001 budget was adopted in very complex circumstances. He admitted that the economy and citizens were "exhausted," and that because of that as substantial reductions as could possibly be arranged of income tax and other taxes and deductions were planned. All this was done with the approval of international financial "authorities," with whom Macedonia has signed arrangements. He pledged full transparency in spending the money taxpayers earn by the sweat of their brows, and called on them to regularly meet their obligations towards the state.

The 2001 budget and its justification from the speaker's platform have strongly shaken the political scene. People were taken aback by "the gift" and the manner of its presentation, being themselves involved in the process of tasting its "benefits." In numerous opinion polls they say that their memory is not that poor, that they haven't forgotten that last year's budget "surplus" was created by emptying their pockets via high tax rates, deductions and excise taxes, and warn that nothing like that should be repeated ever again. They stress they are particularly pressured by high prices, especially those of oil, which are "adjusted" every two weeks or so to their detriment. Sometimes they are even lowered, they say, but very rarely. They reminded the prime minister that he had promised he would reduce the taxes and deductions almost three years ago, in the 1998 parliamentary elections, when he won the people's trust and that now that he is about to fulfill some of his promises, he shouldn't expect the people to organize a festival to celebrate this belated measure.

Economic analysts demand that the government go public with a plan of how it intends to spend undefined budget funds and say that their amount -- DM150 million -- by far exceeds all IMF and World Bank arrangements. They criticize the fact that DM700 million received from the sale of the lucrative Macedonian Telekom to a Hungarian-German-American consortium was not made part of the state budget and that a strategy for its spending has not yet been prepared. They warn that these funds should not be treated as no man's property, and be used to meet the enormous appetite of various apparatchiks in the government ministries who are currently busy drawing up numerous unrealistic and megalomaniac projects.

The leaders of opposition political parties who did not take part in the session which passed the budget are now revealing their stands at heated press conferences.

The most diligent are VMRO-DPMNE representatives, who had submitted a total of 107 amendments to the draft budget, all of them rejected by Finance Minister Georgijevski. They say that the authorities have tailored a budget to suit solely their needs, and warn of possible catastrophic consequences. To support this they quote the budget items dealing with "luxuries." At a time when every fourth Macedonian has hardly anything to eat, the authorities planned to spend DM242 million on new furniture and vehicles, and DM40 million on travel expenses of some 1,000 officials and public servants. This, which they brand as "ultimate insolence," means that each one of them will have DM40,000 for that purpose alone. This money, says the party president, Boris Stojmenov, could create 30,000 new jobs.

The Social Democrats are also displeased with the manner in which the budget was adopted, with no participation of those whom it concerns and in swift passage. They oppose its 19.6 percent increase compared with last year's budget, because conditions are hard, poverty affects all of society and the economy is on its knees. They warn that spending in the country exceeds revenues, and that this should no longer be tolerated. They strongly oppose the sale of profitable domestic companies to foreigners and so-called capital investment, which boils down to purchasing old buildings to be used by the administration. They are convinced that the budget legalizes robbery, and that it will further impoverish the people and the economy.

The ruling VMRO-DPMNE, the DPA and the Liberal Party see in this criticism "a new attempt by the opposition to exploit even the most important financial document of the country for political purposes and to further boost their phased project to gradually topple the government and destabilize the country." If it weren't serious, this constant charging of the opposition with subversion would indeed appear pitiful.

Despite all this, however, certain steps taken by the Macedonian Finance Ministry deserve praise. Namely, on the basis of past experience, it has concluded that a number of people have no idea of what a budget is, how it is filled and for what its funds are used. Consequently, the Ministry launched an interesting and aggressive media campaign to explain all this rather picturesquely -- through TV commercials, newspaper articles in Macedonian and minority languages, and posters put up in Skopje and other towns throughout the country. The campaign is meant to explain to tax evaders and their supporters whom they are thus depriving of services and assistance, whose lives they are thereby endangering, and who is threatened by their failure to comply with laws. The campaign is meant to raise the consciousness of people "amassing wealth at the expense of others, believing that there is nothing wrong with what they are doing." The campaign is not sponsored by any party and is funded by international funds. Its leader, the Men Ericsson company, was elected through a tender and it includes popular actors, well-known Macedonian directors and playwrights, such as, for example, Slobodan Unkovski.

Time will show whether the people now better understand the "2001 Pizza Budget," as the campaign's most popular TV commercial is called, and whether they will accept it as a gift, or yet another attempt at plunder.

Branka Nanevska

(AIM)