15th November 2021, Skopje – Upcoming 2022 will be a year of further economic recovery and accelerated growth via investments, projected in the Draft Budget at historic high, funds allocated therefore being higher than the budget deficit amount for the first time ever. Still, amid the risks related to the protracted COVID-19 pandemic, protecting the health and the lives of the citizens is crucial. Regular payment of wages, pensions and social contributions, as well as support to the economy, are essential part thereof, Minister of Finance, Fatmir Besimi, pointed out today, while presenting the 2022 Draft Budget before the Finances and Budget Committee at the Parliament of the Republic of North Macedonia.
Total revenues under the 2022 Draft Budget are projected in the amount of Denar 238.9 billion, being higher by 7.4% compared to this year’s revenues. Total expenditures are projected in the amount of Denar 272.4 billion, being by 1.4% higher in relation to 2021. Deficit is projected in the amount of Denar 33.5 billion or 4.3% of GDP, being lower by 2.2 percentage points compared to the 2021 projected deficit.
Under the 2022 Draft Budget, capital investments are projected in the amount of Denar 37.8 billion, by around 27% more in relation to 2021, being higher than the budget deficit amount, thus adhering to the golden rule of government spending.
Before the Committee’s members, Minister Besimi pointed out that peculiar feature of the Budget is the development component it includes, thus ensuring continuous financing of the functions of the state, as well as strong financial support for economic recovery and accelerated, inclusive and sustainable economic growth.
“Peculiar feature of the 2022 Draft Budget is that the deficit will be used solely to support a substantial portion of capital investments. According to all features, the 2022 Budget will include a development component. Budget’s development component is reflected in the increased funds for capital expenditures by approximately 27% compared to 2021, in particular Denar 8 billion more has been projected for capital projects in 2022. Next year’s capital expenditures are projected at all-time record high level, accounting for 14% of the total expenditures”, the Minister underlined.
According to the Minister, funds will be borrowed exclusively for capital investments, with citizens’ money being geared towards generating greater benefits – higher quality of life, adhering to the “value for money” principle.
Funds will be intended for intensifying the implementation of infrastructure projects, i.e. investments in road and railway infrastructure, energy and utilities infrastructure, as well as capital investments aimed at improving the conditions in the health, the education and the social systems, agriculture, culture, sports, environmental protection and judiciary.
The envisaged projects, among others, include construction of the highway on Road Corridor 8, railway track on Rail Corridor 10 and Rail Corridor 8, construction of physical education facilities, construction and rehabilitation of primary and secondary schools, new kindergartens, construction of gas pipeline network, …
“In order to respond to the still present challenges stemming from COVID- 19 pandemic, more funds, amounting to Denar 7.4 billion, are projected to be allocated for the health sector. Significant amount of funds is intended for procurement of COVID -19 vaccines; around Denar 260 million is allocated for reconstruction of public health institutions; procurement of medical equipment, renovation and equipping of vaccination points, as well as other programs”, Besimi said.
Draft Budget, in addition to allocating more funds for capital investments, also envisages activities aimed at greater efficiency and effectiveness in using the funds. Better efficiency and effectiveness in using public funds will be attained via strengthened monitoring within the CAPEF (capital expenditure efficiency) mechanism, introduction of several indicators for measuring the performance of budget users, as well as Integrated Financial Management Information System and Integrated Tax Information System.
“Budgeting must not be seen as an isolated initiative, but rather as a part of broader institutional reforms, the goal of which is better quality of life for the present and the future generations”, the Minister pointed out, adding that cutting down the current expenditures to 86% of the total expenditures speaks in favour of putting the focus on capital investments in 2022.
Under the Draft Budget, operating expenditures have been reduced by Denar 4.3 billon compared to 2021, being by 2% lower and amounting to Denar 234.6 billion. Thereby, expenditures related to goods and services, projected in the amount of Denar 20.6 billion, have been reduced by around 6% or by Denar 1.3 billion, as a result of the fiscal consolidation and reduction of the operating expenditures to minimum.
The Minister conveyed a message that the citizens can feel certain that the 2022 Budget is liquid, implying that wages, pensions and social allowances will be paid on regular basis.
We remain committed to optimizing the administration by overseeing new employments, as well as improving the quality of life of employees and increasing the motivation for professional, high-quality and complete fulfillment of the working tasks. Wage increase is envisaged for the health workers, inspectors, judiciary and prosecution staff, professional soldiers, IPA structure employees, forest police officers.
The Minister underlined that the structure of expenditures for goods and services provides for more efficient use of the operating resources by better planning and execution of operating expenditures, reducing non-essential expenditures, such as travelling costs, contractual services and representational costs, at the same time introducing spending standards.
Social transfers are projected in the amount of Denar 124.5 billion. Denar 64.4 billion is projected for payment of pensions, all to the end of providing for a dignified standard of living, Denar 11 billion is projected for payment of social protection allowances to the most vulnerable groups, Denar 1.4 billion for payment of unemployment benefit and Denar 1.8 billion for active employment policies and measures.
2022 Draft Budget is also geared towards improving the pupils’ and students’ standard. Student meals for full-time students will continue to be subsidized in 2022, with the scholarship envisaged to be increased to Denar 3,500 for pupils’ scholarship and Denar 6,050 for students’ scholarship.
Support to the private sector is also envisaged in the Budget, to the end of accelerated, inclusive and sustainable economic development. Funds projected are intended for supporting small- and medium-sized enterprises, boosting the competitiveness, innovation activity, technological development and research, new investments, supporting the export and conquering new markets, supporting job creation and similar. Sectors most affected by the COVID-19 induced crisis will continue to be supported, with the subsidies projected in the amount of around Denar 4 billion. To the end of green transition and better management of climate and environmental challenges, as regards the environment sector, new Green Development Program, in the amount of Denar 4 billion, is envisaged, which is geared towards reduction of greenhouse gas emissions, better quality of water, air and soil, as well as using new renewable energy sources.
Support to the agricultural sector will continue via payment of subsidies and funds under the IPARD Program, with the municipal funds also increased through the fiscal decentralization reform. In 2022, municipalities will be allocated Denar 500 million, or 21% more than the funds projected in 2021, on the basis of increased percentage of VAT grants from 4.5% to 5%.
The Minister pointed out that the key economic policies and reforms, aimed at achieving accelerated, sustainable and inclusive economic growth amid COVID-19 induced pandemic, and facing the challenges of the energy crisis and the upward price trends, remain committed to improving the conditions for a functioning market economy which will be competitive on the European market and wider.
What is expected in 2022 is accelerated growth, projected at 4.6%, amid scaled-up gross investments by 8.5% in real terms. Final consumption is projected to increase by 3.1%, export by 8.3%, whereby the number of employed persons is also expected to increase by 3.1%.
In addition, inflation rate is expected to be stabilized, being projected at 2.4% in 2022, whereby the price pressures stemming from the uncertainty related to the prices of energy and some of the primary products on the global stock markets, are expected to be eased starting the second quarter of the year.
“We have set an ambitious goal for 2022 which, in the light of the envisaged policies, is on solid basis to be reached”, the Minister said, adding that they remain committed to achieving the priorities for accelerated economic growth, in particular focusing on the health sector, fiscal consolidation, ongoing reforms, judiciary and EU integration, Green Agenda, digitalization, innovations and technological development, human capital development, investments in physical infrastructure, social cohesion and strengthening the institutional capacities.
The Budget is a strategic document, a financial mirror of Government priorities, geared towards implementing the Government Program in favour of the citizens. Adopted strategic documents covering the medium-term period 2022-2026, which this Budget designing and planning is based upon, provide for underpinning the accomplishment of these goals.
At the session, the Minister expressed his expectation for a constructive debate on the 2022 Draft Budget.
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