31st January 2023, Skopje – 57.1% public debt, being by 3.9 percentage points lower compared to 2021, budget deficit by 1 percentage point lower than the 2022 projections, while being lower by 8.7% compared to 2021.
These facts clearly speak in favor of the policies we implement, all this being attained even in crisis situation as the most remarkable matter. This was pointed out by Minister of Finance, Fatmir Besimi at the “Year of New Opportunities” Conference, covering the topic “Fiscal, Monetary and Tax Polices in Times of Crises”.
“Public finance management is the most intricate challenge in times of turbulent economic environment. Expansionary fiscal policy pursued in times of pandemic, via targeted support for maintaining the liquidity of companies, preserving the jobs and providing social assistance for the unemployed and the vulnerable categories, resulted in increased budget deficit, accounting for 8.1% of GDP in 2020, thus contributing to a sharp increase in the public debt to 59.7% of GDP, reaching a public debt of record 61% in 2021, which we managed, as a result of the continuous commitment to fiscal consolidation, to reduce to 57.1% of GDP as of 31st December 2022 inclusive”, Minister Besimi pointed out.
He stressed the significance of reducing the public debt level in crisis situation, being below the Maastricht Criterion (60%).
“Budget deficit also ranges within the Maastricht Criterion (3% of GDP). If we take into account that approximately 2% of the total 4.3% deficit, pertains to the crisis management, the deficit attained is within the scope of the European Rules”, Besimi pointed out, thereby adding that the downward trend of the deficit was recorded at beginning of this year as well, being by 35% lower than the deficit realized in the same period in 2022.
He assessed that this was a really specific year, entailing implementation of policies, which were supposed to ensure stable, efficient and sustainable public revenues, as also affirmed by the international institutions.
Making the IMF PLL funds available to our country is yet another affirmation of the sound and sustainable economic policies, being also recognized by the investors in the course of 2022. Thus, funds were also provided for covering the budget deficit and repaying the prior debts under more favourable conditions and upon lower costs. The affirmed credit rating by Standard and Poor’s also speaks in favor of the sound policies we implement.
“We will both remain committed to the fiscal consolidation and keep undertaking the respective reforms. Organic Budget Law was adopted, with fiscal rules being set therein. Reforms were launched, aimed at putting modern tax system in place, implying fairness, efficiency and transparency, based upon state-of-the-art digital technologies and innovations, all to the end of attaining accelerated, inclusive and sustainable economic growth. Introduced tax reform does not entail increasing taxes but rather expanding the tax base and revising the tax exemptions that cause unequal treatment of taxpayers”, Minister Besimi said.
Panel discussion was attended by the Governor of the National Bank, Anita Angelovska Bezhoska, the Director of the Public Revenue Office, Sanja Lukarevska, the Academician Abdulmenaf Bexxeti and Gligor Bishev, Advisor to the Prime Minister.
Governor Angelovska Bezhoska also touched upon the role the coordination of macroeconomic policies plays in preserving the economic stability, particularly in times of crisis.
“In times of pandemic, monetary policy provided support to the fiscal policy. Now, to cope with inflation and maintain stability of the foreign exchange market, fiscal policy is to underpin monetary policy. Hence, it is exceptionally important to pursue prudent monetary and fiscal policy, based on both well-targeted and time-restricted measures aimed at the most vulnerable sectors to mitigate the effects on the short term, even more significantly on capital investments which will maximize the growth potential on the long term and, coupled with structural reforms, will underpin the transformation of the economy”, Angelovska-Bezhoska said.
PRO Director Lukarevska pointed out that it is PRO’s obligation to completely digitalize the processes and modernize the services rendered to the taxpayers, shorten the bureaucratic procedures and increase their effectiveness and efficiency. “Thus, as Lukarevska said, room for informal economy is narrowed, providing for fair market and competition for the formal businesses.
Introduction of e-invoice is a process we prepare this year, which will provide for issuance, transmission and receipt of invoices in electronic form through the respective system of the Public Revenue Office, recording all invoices on the basis of supply between taxpayers, government institutions, end-recipients of goods and services, as well as online stores.
E-invoice will prevent the instances of undeclared tax when transactions in e-commerce take place, enhance efficiency of oversight and eradication of VAT frauds (fictitious invoices), with oversight aimed at high-risk taxpayers”, Lukarevska said.
Academic Bexheti said that tax reforms are necessary as per the Strategy adopted more than a year ago.
“Considering the circumstances of the existing tax system in North Macedonia, which is very regressive, with the tax base incorporating explicitly conditional exemptions and deductions, insufficiently convergent with the tax systems in the EU Member States, lacking flexible solutions for taxation of extra profit as a result of the crisis, expressly taxing income on the basis of employment compared to capital income, without adequate eco-friendly taxation solutions, with the level of tax digitalization mismatching the challenges of the present time, online procurement not efficiently contained and, as such, still generating high rate of informal economy, tax reforms, in line with the new tax reform concept and the Strategy adopted more than a year ago, are inevitable.
Fiscal history a century ago till today, including the latest inflationary and energy crisis, has shown that it is the big economic crises that are yet another reason to accelerate the reforms, rather than the other way round”, Bexheti pointed out.
At the panel discussions, Bishev underlined that monetary policy will remain primary instrument to bring down and curb inflation through higher interest rates and slowing down the growth of credits.
“Fiscal policy, according to him, will support lowering the inflation by reducing the budget deficit. At the same time, by allocating considerable amount of funds for infrastructure investments, it will continue underpinning the growth and the competitiveness of the economy. This will be the optimal mix to achieve the ultimate goals of price stability and a positive economic growth”.