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Sound public finances are the highest value for future generations

Last update: 12.06.2023 11:00

Today the Government of the Slovak Republic presented the Manifesto of the Government. One of the biggest priorities is the area of public finances, as the state's ability to ensure the quality of education, health and social services for all citizens depends on them.

The Ministry of Finance of the Slovak Republic has introduced several important measures in the Manifesto of the Government, the aim of which is, first of all, to stabilise the situation in public finances as soon as possible. The measures are divided into short- and medium-term based on the time available for their implementation.

Short-term priorities:

  • Presenting a roadmap for a gradual recovery of public finances.

While last year the general government deficit fell sharply to 2% of GDP, this year will already see the full impact of expenditure related to compensating for high energy prices. This is also why we expect the deficit to rise above 6% of GDP. The plan is therefore based on a thorough assessment of the state of public finances in 2023, taking into account the development risks this year. The plan is intended to ensure a shift towards restoring long-term sustainability which would be gradual for the public finances and manageable but significant for the economy and society.

  • Reviewing the household energy price assistance scheme.

Across-the-board aid in the energy crisis is a significant burden on public finances. The Ministry of Finance will therefore actively engage in cooperation with the concerned ministries and evaluate the possibilities of more targeted assistance. The aim is to ensure that the most vulnerable groups of the population, who need it the most, receive the most assistance. This is also confirmed by the figures. While energy costs for the poorest households account for up to 18.4% of their total income, the ratio is 8.7% for wealthy households. We also aim to reinforce the motivation to seek savings in energy consumption. 

  • New rules for assessing public investment.

In the short term, the Ministry of Finance will also focus on a change in assessing investment projects, where the state can save considerable funds and channel them into other priorities. Economic assessments of investments have the greatest added value for large projects. Projects under 10 million euros accounted for roughly 75% of assessments in 2022, but delivered only 10% savings. As currently projects as low as 1 million euros are assessed, the Ministry proposes to increase this threshold in order to focus expert capacities more on large projects and activities with higher added value. For smaller projects, individual ministries will have more flexibility.

Medium-term priorities:

The Ministry of Finance will prepare a set of measures that will form the basic legislative framework for the next government. These are proposals that will mainly aim to stimulate the economy, modify existing rules, all with an emphasis on sound public finances.

One of the key medium-term priorities is to modernise and simplify the tax system. In other words, it is an adjustment of the so-called tax mix. Measures should also adjust the taxation of consumption and wealth, for example in the areas of property taxes or so-called negative externalities.

The Ministry of Finance will also propose optimisation and abolition of unsystematic exemptions in the tax area, which burden tax authorities and taxpayers themselves. We also see room for reviewing the application of reduced VAT rates.

Fundamental needs also include “modernising the debt brake”. The Ministry of Finance will therefore prepare the foundations of an amendment to the Constitutional Act on Budget Responsibility, which the new government could translate into an amendment to the Act at the beginning of its term of office. The aim is to peg the sanction zones to the net debt indicator, to change the sanction zones and the related sanction system, and to anchor the basic frameworks of expenditure limits in a constitutional law.

Press Department
Ministry of Finance of the SR