5th November 2021, Skopje – “2022 Budget is envisaged to include a development component, with capital investments higher than the deficit and the funds being geared towards policies generating greater benefits for citizens, since these cash funds belong to them, thus producing “value for money”, Minister of Finance, Fatmir Besimi underlined in his interview for “Win Win” TV show on Telma TV Channel.
This Budget, as Minister said, is aimed at generating higher growth rates and improving the living standard of citizens. Announced instruments envisaged in the Growth Acceleration Plan have been already incorporated in the Budget, which will provide for mobilizing funds from the private sector, whereby citizens will also be able to participate in the implementation of major infrastructure projects. It is a matter of development projects, green bonds, as well as inflation-indexed bond. Minister also announced developing a new platform with Bloomberg, thus providing for the regional banks to also invest in our securities.
Minister stressed that inflation-indexed bond is geared towards attracting the funds citizens have at their disposal.
“Initial goal is to motivate citizens to use one part of their cash savings for purchasing financial instruments. This means if someone has EUR 10,000 in savings for a longer period of time, it loses value over time as prices, i.e. inflation rise. EUR 10,000 as of five years ago and nowadays are not worth the same. “Hence, with the citizens purchasing government bonds, opportunity will be created to use these funds for reducing the informal economy,” Minister Besimi said in the interview.
Thereby, Besimi went on that the second benefit from the issuance of this Bond is that the citizens will receive an annual return at the level of inflation, thus the money will loss no value therefrom. Third benefit is that the funds will be used to finance development projects of national significance, thus having them returned back to the economy”.
What is important is to always offer market instruments for the cash funds invested by citizens, thus stimulating them to make high-yield investments.
This is one of the instruments, citizens will also have the development bond, the project bond, as well as the green bond, at their disposal, which are designed specifically for capital investments, as already proven by certain experience worldwide.
According to Besimi, these instruments will be an opportunity for our citizens from the diaspora keeping their money in banks in developed countries where interest rates are almost zero, to invest them in government securities for the purpose of financing development projects in our country.
“They will be given the possibility to invest 10,000 euros or dollars in a bond, related to a certain project, thus making investments in the growth of their country, whereby their money is guaranteed, and they are to receive a higher income than that of the banks in developed countries where they keep their money. Thus, their connection with the country is even stronger, not only in economic terms, but rather their money turned into an investment,” the Minister explained.
Minister Besimi announced that a new platform with Blomberg will be also designed so as for such financial market to be developed in our country, which will provide for the regional banks, apart from the domestic ones, to be able to invest in our securities, thus also developing new instruments, which will mean more funds for these investment projects.
Besimi also pointed out that important strategic documents were adopted, such as the Fiscal Sustainability and Economic Growth Plan, thereby pursuing fiscal consolidation-related policies.
With respect to measuring the performance of infrastructure projects, performance indicators have been introduced in the 2022 Budget.
“With respect thereto, the 2022 Budget has already introduced novelties, i.e. 5-year performance indicators, being called input and output indicators, Minister stressed, for which purpose, technical assistance is to be provided from international financial institutions such as IMF.
Minister underlined that the introduced CAPEF mechanism has already yielded results with respect to the capital investments performance.
“This year, better performance has been recorded, mechanism to observe each quarter of the year has been introduced, being also geared towards reallocating the budget funds from those with poor execution of capital expenditures to those with better execution thereof”, Besimi said.
Minister of Finance talked about the GDP growth, thereby pointing out that “Ministry of Finance did not change the 4.1% projection, however, the indicators show that this level is to be exceeded on annual basis”.
“Thereby, the public debt did not increase, accounting for 59.3% as of the third quarter inclusive. According to the initial projections, this and next year, public debt is lower than the one projected in the medium-term strategy, i.e. it would account for around 61.2% this year, which is to be lower by 2% than projected , i.e. around 63.9% next year. The trend is featured by continuous change in the numbers, and the very essence of the Growth Acceleration Plan is accelerated economic growth, while maintaining fiscal consolidation, which means public debt and budget deficit will be within the Maastricht criterion, Minister said.
Besimi believes that what is most important is for our small economy, to focus on areas with greatest potential, that being the innovations.
-All policies and strategies in future should provide for supporting investments, innovations and development, transformation towards digital and green economy, not being focused only on our market but beyond as well, so as to succeed in achieving such an ambition. In the long run, we need to improve the trade balance, and generate higher income in our country, meaning more money for the citizens and better living standard, Besimi said, adding thereby that the support should be geared towards companies, which will survive and thrive on the market, introduce innovations and make investments. Therefore, as he explained, support is extended to companies, which will increase the number of employed people and the investments, thus turning part of the obtained funds into subsidies.
Minister also addressed the fiscal decentralization reform during his interview.
Besimi pointed out that the amendments to Law on Local Financing provide for increased percentage of VAT and PIT revenues, which is to be already applied as of next year.
“In addition to providing more funds, it is important that financial discipline is strengthened and pursuant to law, financial instability will be declared, after which a plan for its overcoming is envisaged through several instruments, that being: the 10-year structural bond to be issued for a fairly long period so that municipalities will be able to adapt thereto, the bonds, which will be issued by the municipalities and purchased by MoF and a Stand-By Arrangement. Existing arrears should be reported by March, and agreements with municipalities being financially instable, will be concluded by June, thus being able to forthwith settle their accumulated arrears”, he said.