This year's budget will be amended, but not in order to increase or reduce revenues or expenditures, but to cover the costs of public-sector employees through a reallocation of funds as these costs have not been reduced as planned, Finance Minister Slavko Linic said on Monday.
Linic made the statement while speaking to the press after the signing of a loan agreement between the Croatian Bank for Reconstruction and Development and the International Bank for Reconstruction and Development. He said that the budget would not be revised, but amended, and that this was not because of the Brodosplit shipyard.
Budgetary revenues and expenditures will not be increased or reduced, but funds will be redistributed from various budget items by reducing expenses for some of the projects that are not being implemented according to plan and in that way we will cover the costs of public-sector employees where savings have not occurred as expected. That process will then secure funding for Brodosplit too, Linic said.
Linic was also asked to comment on last week's speech by National Bank Governor Boris Vujcic, who expressed concern that instead of a new and different economic policy, old failed models were once again being proposed. Linic said that the governor should be asked to explain what he meant by old economic policy models.
The Croatian economy is in deep crisis. Capital values in companies have been destroyed and they do not have enough to maintain their production, let alone to invest. This year the fiscal burden has been eased by reducing the cost of labour and abolishing parafiscal levies, and the budget deficit is still standing at 10 billion kuna, or 3.2% of GDP. Under these circumstances, the question is what to do next in fiscal policy apart from austerity, the minister said.
State investments have not produced results and there is no interest in loans for investment in the private sector, even though funds exist and the government has ensured that interest rates have been reduced to slightly over 3%. There is no interest because companies have not been restructured. That will commence once the law on financial transactions comes into force, Linic said, noting that he did not realise that these were old economic methods.
The government, together with the banks, is trying to consolidate the financial situation in companies and to ease their burden by cutting costs, Linic said.
