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25th September 2022, Skopje – Under the new Organic Budget Law, adopted by the Parliament last week, budgeting will be performance-based, including key performance indicators to measure it. 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, i.e. the best way to improve the expenditure policy making is by using the performance-related data, Minister of Finance, Fatmir Besimi, wrote in his latest column dedicated to the new Organic Budget Law.

“Performance-based budgeting will provide for improving both the efficiency and the effectiveness of public expenditures. In order to attain this, the general objectives (policy-related), the specific objectives (related to certain programs), as well as the desired results, i.e. the indicators (related to the sub-programs) should be clearly defined. In addition, amounts spent for a specific purpose – input indicator, are also determined. This will provide for concise and transparent monitoring of the funds spent for a specific purpose, as well as the results based thereupon. Such manner of planning is expected to contribute to both fiscal consolidation, as one of the fiscal policy goals, and improved implementation of the capital projects”, Minister of Finance pointed out.

Number of key changes are introduced under the new Organic Budget Law, which pertain to planning, managing and performance and execution of revenues and expenditures, as well as fiscal transparency and accountability. One of the key reforms envisaged under the Law is the medium-term projecting, i.e. medium-term budgeting and five-year fiscal strategy.

“The Law provides for strengthening the structure and the contents of the Budget and the management of public financial and non-financial assets, including publishing Registry of Public Entities. Setting fiscal rules and fiscal principles, as well as establishment of a Fiscal Council, which is to provide independent and professional analyses and opinions on macroeconomic and fiscal assumptions, the Fiscal Strategy, the Budget, the budget execution reports, the fiscal risks, etc., comprise significant part of the reform. To the end of increasing the Government’s accountability, statement on fiscal policy is introduced, which is to include guidelines for the fiscal strategy during the Government’s term. Moreover, by improving both the quality and the quantity of the reports, fiscal transparency will be enhanced. Integrated Financial Management Information System – IFMIS will ensure better planning and monitoring of budget revenue performance and budget expenditure execution.

Budget preparation cycle is expanded so as to provide more time for better planning and inclusiveness in the process of preparation by introducing mandatory public debate on the draft Budget, prior to the parliamentary procedure. Furthermore, Budget preparation process is aligned with the preparation of the three-year Economic Reform Program, which the European Commission assesses, followed by recommendations on future policies and reforms in the country.

“We have set a framework for pursuing sound, predictable and sustainable fiscal policy, as well as increased budget discipline and responsibility. Given the new legal solution, we expect for the fiscal policy to be focused on consolidation of public expenditures by gradually reducing the deficit level, as well as redesigning public expenditures through scaled-up investments in the field of infrastructure”, Besimi emphasized.

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