Economic Policy Review ISSN 1313 - 0544

Question mark (?) and Exclamation mark (!) for the Budgetary Expenses?!

Author: Petar Ganev / 29.06.2009
Rate This Article:

The crisis affected everything - the economy stopped growing, the unemployment began to increase, the foreign investments disappeared somewhere, getting credits became very complicated, the revenues to the budget shrunk and in general things are not rosy at all. However, there is something which is not affected by the crisis. Something which is so fare from the market processes and in general from rational thinking that there is not a crisis which could frighten it. Naturally, I am speaking about the so called budgetary expenses, or to put it differently, all the money which is taken from us as taxes and later on is spend by the smart heads in the Government. Here is how the things look:

What is happening

Before the crisis?

 

 

Year of the crisis?

Growth of the economy

Shrinking of the economy

More employment

Less employment

Growth of foreign investments

Reduction of foreign investments

Easy access to resources (credits)

Difficult access to resources (credits)

Growth of budgetary revenues

Reduction of budgetary revenues

Growth of budgetary expenses

Growth of budgetary expenses!?!

The main problems with the budgetary expenses this year is the lack of sufficient information on one hand and the coming parliamentary elections on the other. Practically, at present, we have data only about the first quarter of the year, which does not allow for any serious analysis. The only thing which is clear is that the revenues are shrinking, while the expenses are growing, which is sufficient as a cause for concern. It becomes even more a reason for concern when we take into account that those who are spending at present may not be in power when the data about their spending become available. The practice is such that if certain expense is made at present (or during May), the data about it would become visible just before the elections. However, if various expenses are delayed and become a fact during the month of June (even if it is the 1st of June), the data would become available after the elections, when the responsibly would not be very clear.

The worst scenario would be if the growth of the budgetary expenses at present is combined with delays of various payments, which are inevitable. That could be payments for the operating programs, payments for government contracts and even the payback of VAT. That would mean that the increase of government spending is much greater than that which is visible today, but we would simply find out after the elections. The scenario is really negative, but there is data (mainly from the media) about such delayed payments.

Actually, the expenses of the state are not related only to the present - part of them are financed from the past (the fiscal reserve), the main part from the present (tax revenues during 2009) and one part is financed by the future (state loans, which would be repaid with tax revenues from the coming years). Precisely the last types of expenses (financed from the future) are the other threat under the conditions of a crisis and the upcoming elections. These are expenses which would not show in the regular reports about the execution of the budget, but could have a very serious effect on our economy for years to come. The ideal example is Belene Nuclear Power Plant, which would be a burden for the forthcoming years, but at present this burden does not appear in any of this type of reports.

For the time being we could only hope that the government has a strong ambition to remain in power after the elections and respectively is not creating havoc, which then someone else would have to sort out.