The budget of the Republic of Croatia for 2024 is planned with three percent higher revenues and 11.2 percent higher expenditures. The budget deficit is expected to be 1.9 percent of GDP. Particularly noticeable is the projected wage mass, which is 32 percent higher than in 2023. How much will the rights that will be approved this year regarding salaries in the public and state sectors burden budgets in the coming years? This was the question with which we began the interview with Finance Minister Marko Primorac.
What are your arguments for increasing salaries in the public sector?
– The COVID-19 pandemic in 2020 caused economic turbulence that was further deepened in Croatia by two devastating earthquakes. Russia’s aggression against Ukraine has significantly impacted the rise in prices, especially energy and food, which has had a strong inflationary effect. Social benefits and employee allowances are increasing mainly to align household incomes, especially for the most vulnerable, with rising living costs. Additionally, Croatia has committed in the National Recovery and Resilience Plan to implement a reform of the salary system in the civil service and public services. The salary reform is based on four key principles: increasing salaries (salaries will rise for everyone), simplifying the system (we have halved the number of different job positions), fairness (similar pay for similar work), and reducing inequality (lower salaries grow more).
The sustainability of future budgets will also be under pressure from reduced non-repayable EU funds.
– When we talk about the use of funds from EU funds, one of the Government’s greatest successes is the historically high amount of financing sources from non-repayable and favorable funds from the European Union – more than 25 billion euros in this decade. If we appropriately utilize the generational opportunity we have secured, our economy will reach eighty percent of the average development of the European Union before the end of the decade. Such accelerated convergence is the realization of our fundamental goals of EU membership and will make our economy, and consequently the state budget, long-term resilient and sustainable. In the Ministry of Finance and the Government, we always pay special attention to the permanent reduction of the share of public debt in GDP, and we can soon expect its reduction below sixty percent. This will be supported by maintaining the budget deficit below the reference level of three percent of GDP by the end of 2026. By adhering to the rules, i.e., complying with the fiscal criteria from Maastricht, we ensure fiscal sustainability in the medium term.
How will the Regulation on large investments function?
– The Government, at the proposal of the Ministry of Finance, adopted the Regulation on the method of evaluation and the procedure for approving investment projects at the end of 2023. This regulation establishes systematic and unified rules for the professional evaluation and assessment of the justification and effectiveness of investment projects at the state, regional, and local levels for the first time. In this way, a framework for evaluating investment projects according to prescribed criteria has been provided. Investment projects are categorized based on total investment costs into small, medium, large, and micro-projects. Depending on the size of the investment project, different obligations are prescribed for the project holder, such as the complexity of the documentation that needs to be prepared, the method of selecting projects for financing, monitoring the implementation and effects of projects, and reporting on them. For medium and large projects, valued at over five million euros, the Regulation prescribes the establishment of an interdepartmental commission for selection at both the state and regional and local levels. The commission checks whether pre-investment studies and project documentation have been prepared, whether funds for project implementation have been secured, and whether the sustainability of project results has been assessed. The compliance of the project with the objectives of strategic planning acts, public policies, the impact of project implementation on society and the environment, the availability of funding sources, and similar factors is also checked. The Regulation fully applies to investment projects whose implementation and financing will be planned in the budgets and financial plans for 2025, which means that operational activities will begin in the spring when the new budget cycle starts. As part of this process, the Ministry of Finance will establish a register of investment projects based on the information that project holders provide electronically. In the next period, we will further focus on strengthening the expertise of civil servants in this area, as well as on developing an IT solution that will support the management of investment projects.
