31st July 2022, Skopje – Medium-term projecting and budgeting, Integrated Financial Management Information System (IFMIS), as well as the introduction of a Fiscal Council and fiscal rules and principles, are the major reform foreseen under the new reform Organic Budget law, adopted, upon the second reading, by the Parliament, expected to be soon considered at a plenary session as well. New Organic Budget Law is the cornerstone of the SMART public finance system, as Minister of Finance, Fatmir Besimi wrote in his article.
-Performance-based budgeting is introduced under the Law, by putting key performance indicators in place, for the purpose of improving the public expenditure efficiency and effectiveness by connecting the costs in the public sector with the respective performance. Performance-based budgeting aims to ensure that the key decision and policy makers will systematically take into account the results to be achieved by executing the expenditures. This will also provide for attaining the goal related to defining the priorities and the policies as regards the Budget as per the value for money concept, meaning that the budget funds will be allocated where greater benefits are generated, thus providing for higher living standard and better-quality of life of the citizens as Besimi wrote.
New Organic Budget Law also incorporates mechanisms for better planning and projecting, as well as implementing capital projects, Budget users, as part of the budget preparation process, will have to submit a pre-feasibility or feasibility study to the Ministry of Finance for all new proposals about major investments, where organizational Public Investment Management Assessment Unit will be established.
In fact, budget deficit is projected to be up to 3% of Gross Domestic Product, with public debt being projected up to 60% of GDP, which, as per the new methodology, is actually considered as a general government debt (the Government and the municipalities), whereas the guaranteed debt of public enterprises and other public sector institutions, not being budget users, is limited to 15% of GDP. Establishment of a Fiscal Council is also regulated thereunder.
– Fiscal Council aims to independently evaluate the fiscal policy, the strategies and their implementation, as well as macroeconomic and budget projections. Fiscal Council will be composed of 3 members – experts in the field of public finance, macroeconomics or economics, proposed by the Macedonian Academy of Sciences and Arts, the State Audit Office and the National Bank, who are to be elected by the Parliament – Minister Besimi indicated.
One of the most important reforms introduced under the new Organic Budget Law is the contemporary Integrated Financial Management Information System (IFMIS). Main goal of IFMIS is improving the efficiency and transparency of the operations by connecting the existing fragmented systems to a centralized web-based platform, via the benefits of the state-of-the-art digital technologies.
-IFMIS will provide for integrated monitoring of the revenues and expenditures from their projecting through their performance and execution, which will have effects on improvement of the budgeting and the budget execution. The system will provide for establishing a multi-year budget framework, introducing of a public investment management function related to the future public-private investment system, an automated system for monitoring the liabilities, including multi-year commitments and centralized data on the assumed liabilities, management of fixed assets and debt management.
New Organic Budget Law is planned to come into force as of the beginning of 2023, except for certain provisions pertaining to the Fiscal Council, the strategic planning, the macroeconomic projections, the Fiscal Strategy, the internal financial control and IFMIS, the Organizational Unit for the Organic Budget Law Reform, which are to be applied upon the entry into force of the Law.