20th August 2023, Skopje – Public finances have a sound track record, resulting from the improvements in fiscal governance over the past years, and the ongoing Government reforms to increase public revenues, better target expenditures, and increase the share and the implementation of capital expenditures. Fiscal discipline has improved over the years, with the Government well advancing in Budget formulation, execution and reporting, the European Commission noted in the Draft Screening Report, Cluster I – Fundamentals, as regards public financial management ands economic criteria, a topic the Minister of Finance, Fatmir Besimi, elaborated on in his most recent column.
As indicated in the Report, adoption of the Organic Budget Law provides for carrying out the critical reforms in budgeting, thus strengthening the fiscal sustainability (medium-term budgeting, Integrated Financial Management Information System – IFMIS, introduction of a fiscal council and fiscal rules). The reforms need to be sped up, and to accomplish the comprehensive and ambitious reform embedded in the new OBL, an action plan needs to be adopted, the new institutional structures need to be speedily established and skilled and adequate staffing of key reform units in the Ministry of Finance, the PRO and the Customs Administration need to be ensured in a timely manner.
“PFM Reform Program or “Smart Public Finances“ is designed to address all weaknesses identified in recent diagnostics of the international organisations (PEFA, PIMA, TADAT, SIGMA). It covers reforms in public internal financial control, public procurement, external audit and public financial management, i.e. all aspects the European Union evaluates”, Besimi wrote.
One of the major public finances reform is the implementation of the Integrated Financial Management Information System – IFMIS, contributing to enhanced efficiency by interconnection between the fragmented IT systems used in public finance and greater predictability and control in Budget execution. “Functional and technical documentation has already been prepared, funds for its implementation have been provided, and the Ministry of Finance, in collaboration with the World Bank, is in the final phase of preparation of the tender documentation for procurement of services for development and implementation of IFMIS”, the Minister pointed out in his column.
Accounting and reporting are strong foundations of the PFM system, while transparency of Budget execution has been enhanced through the Open Finance Portal, however, it can be further improved. With respect to the other conclusions within the competences of the Ministry of Finance, EC assessed that the legal framework on public procurement has a high level of alignment with the EU acquis. The legislative framework for public financial internal control is mostly adequate, but a new PIFC Law, prepared by the Ministry of Finance, needs to be adopted.
As EC noted in the Screening Report, during the 2022 energy crisis, fiscal and monetary policy response was appropriate and well-coordinated, while macroeconomic stability was maintained.
All in all, EC believe that Republic of North Macedonia is on the right track in developing a functioning market economy, as well as that it should keep implementing reforms adopted at the Economic and Financial Dialogue between the EU and the Western Balkan countries and Türkiye. Great deal of the required reforms have already been implemented. However, the other reforms should be also implemented throughout the negotiations, as well upon becoming an EU Member State. ““The journey is quite often as important as the destination itself”, meaning that EU accession negotiations guide us in gaining momentum as regards the reform implementation, as indispensable not only for joining the EU, but being also a necessity upon becoming an EU Member State”, Minister of Finance Besimi wrote.