Time scope of such a fiscal outlook is based on the n+2 principle and there is a link to fiscal expenditure
frameworks. The medium-term frameworks are based on the so-called sliding principle, comprising the
total expenditure on the state budget and state funds for each year of the medium-term outlook. The
figure for the medium-term expenditure framework for the first year of the medium-term outlook is
based on the medium-term expenditure framework for the same year and may be adjusted for selected
expenditure items. This way figure for the second year of the medium-term outlook becomes the figure
for the first year of the outlook. This figure can be adjusted to some expenditure (e.g. expenditures
incurred due to unforeseen circumstances or significantly different development of consumer prices,
expenditures in the same volume as incomes from EU budget for programmes and projects co-financed
from this budget etc.). State guarantees approved before April 30, 2004 and refundable financial
assistance is excluded from the expenditure framework. The act also specifies the procedure for the
preparation of the draft state budget for the following year, on the basis of amounts specified in the
medium-term expenditure framework, is also defined therein. The expenditure frameworks are debated
by the government and subsequently approved by the Chamber of Deputies in the form of a resolution
regarding the draft act on the state budget. The medium-term framework is binding and government
must justify all deviations.
Despite the positive influence on budgetary discipline, we find out some weaknesses e.g.:
- Additional expenditures, which will increase the expenditures of the state budget above approved
limits in mid-term expenditure frameworks, should be completed for the decrease of other
expenditures automatically. - The budgetary frameworks should be determined for every chapter of the state budget instead of
being determined only for central government^3 as a whole. - More dubious is the tendency to enlarge what normally be expenditures (and is there fore
restricted by the ceilings) with tax reductions (on the revenue side of the budget and thus not
restricted by the ceilings).
The midterm principle has also been reinforced by an amendment of the Rules of Government
Procedure. All proposals submitted to the government must contain an impact evaluation of proposed
changes on public budgets (estimates of future expenditures and proposed source of financing), at least
over a period of three years in accordance to this amendment.
Measures were also put to control the indebtedness of local governments:
- The Act on Debentures (190/2004), effective May 1, 2004, requires MoF approval of debt issues
before the local governments could approach the Securities Commission for approval. - Based on the government resolution on “Regulation of Municipalities and Regions Indebtedness”
(resolution 346 of April 2004) the MoF should calculate on annual basis “debt service limit
indicators” for each municipality and region. If the actual debt service of a local government
exceeds 30 percent of its indicative limit, the MoF will seek an explanation and will discuss with
the local authorities its plans to reduce its indebtedness. - Effective from August 1, 2004, a new act established procedures for auditing the accounts of local
governments. Accordingly, the MoF will audit the regions, while the municipalities will have the
option of being audited by the regions (free of charge) or by external auditors (at their own
expense). All audit reports will have to be submitted to the MoF. The MoF will review the audit
reports, analysing closely the report of those municipalities, which are the recipients of EU or are
on the MoF’s watch list of high debt indicators.
In accordance with the Public Finance Reform Concept, measures are being prepared that will conclude
the activities of individual privatisation funds and other extra-budgetary agencies and funds of the state.
(^3) Central government consists of the state budget and state funds.