Government adopted budget proposal, planning to save 2.5 billion kuna through structural reforms

The government adopted the budget proposal at today’s session with budget revenues of 114.9 billion kuna, representing a growth of 4.7 percent, and expenditures of 122.4 billion kuna, which is 3.8 billion kuna more compared to 2015.

– “In our budget, as much as 103.2 billion kuna is financed from general sources, which creates a deficit, and there is no increase there,” said Finance Minister Zdravko Marić. “As much as 2.5 billion kuna has been saved through structural reforms,” Marić stated, adding that this government will not reduce pensions and salaries, but will save on everything from subsidies to other expenditures.

The budget deficit, as planned, amounts to 7.5 billion kuna or 2.2 percent of projected GDP.

– “And this is the lowest deficit since 2008, before the crisis,” Marić noted, emphasizing that this budget and this deficit aim to stabilize the share of public debt in GDP.

According to the new budget, the government plans a 1.2 percent increase in tax revenues or 800 million kuna. The total revenue growth compared to the execution in 2015 is expected to be five billion kuna, including EU aid.

Salaries and pensions will certainly not be cut, but social transfers will be, and other reforms will be implemented to stabilize public finances, said Prime Minister Orešković, expressing confidence that our rating will also change thanks to such a budget over the next year.

The government will give consent at today’s session for a loan of 250 million euros from the European Bank for Reconstruction and Development (EBRD) to finance the restructuring of Croatian Highways (HAC). The loan is granted for a period of 15 years, with a two-year grace period for principal repayment, and with a 6-month EURIBOR and a one percent margin with the possibility of fixing interest rates.

The largest part of this amount, 200 million euros, will be used to finance the HAC restructuring project and to close maturing existing loans from commercial banks, while the remaining 50 million euros will be used by HAC for the restructuring of the HAC ONC company. In 2016, the HAC company has 466 million euros in principal and 124 million euros in interest on loans due. Since this public company cannot cover this, with the new EBRD loan, which is better than loans from commercial banks, HAC will manage to reduce interest costs, while the new borrowing will not have direct financial effects on the State Budget. The government also approved the request of the Ministry of Economy, which requested 25 million kuna from the budget reserve for the procurement of commercial wheat.