Budget Rebalance: A Larger Portion of Increased Expenditures Will Go to Healthcare and Debt to Wholesalers

Finance Minister Zdravko Marić reiterated on Wednesday that the budget rebalance is not primarily related to COVID-19 but rather to issues in healthcare and the agreement with wholesalers, after the legal possibilities to resolve this through budget reallocations have been exhausted. Thus, the largest part of the proposed increase in expenditures will go to healthcare, for which an additional more than 2.8 billion kuna is being secured, Marić said in the Croatian Parliament. 

– We will meet existing obligations, but the problem is new debts month by month, which creates additional pressure – said the minister, reiterating that a significant step is necessary on the expenditure side in healthcare.

The rebalance also secures an additional two billion kuna for measures to preserve jobs and reduced working hours. Marić also provided data that as of today, more than 11 billion kuna has been paid out for measures to preserve jobs, reduced working hours, and coverage of fixed costs.

The rebalance also secures an additional 800 million kuna for the salaries of state and public officials, for which the base has been increased by four percent since the beginning of this year, and for which no funds were secured in the original budget. Over the past four years, the government has increased the base for state and public officials by 18.4 percent, and for some, such as education and healthcare, by more than 20 percent. However, part of the public services has initiated lawsuits, so the finance minister states that ‘he cannot say that the planned increase will be sufficient.’

The rebalance also secures an additional 250 million kuna for co-financing European projects, and Marić announces assistance programs for certain sectors, such as the events industry, occasional transport, and travel agencies, which would receive around 150 million kuna to help overcome difficulties.

In the proposed rebalance, the government has maintained its projection of GDP growth this year at 5.2 percent, and 6.7 percent next year.

The government plans to increase total revenues by three billion kuna, to 150.3 billion kuna, while expenditures will rise by 9.4 billion kuna, to 167.4 billion kuna.

On the revenue side, the largest increase is in aid revenues, by 1.4 billion kuna, with the largest part relating to revenues from EU funds, while tax revenues and contributions increase by 750.9 million kuna (from taxes by 336.7 million kuna, and contributions by 414 million kuna).

The proposed rebalance increases the general government deficit from the planned 2.9 percent of GDP to 3.8 percent of GDP (according to the ESA 2010 methodology).

However, despite this, it is expected that the share of public debt in GDP will decrease from last year’s 88.7 percent of GDP to 86.6 percent.

– This kind of rebalance and fiscal policy continues to keep us in the zone of financial and fiscal security. I hope it is our responsibility to continue to do so, which means not opening up potentially problematic situations – concluded Marić.

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