The goals of the government's fiscal policy are to strengthen economic development and maintain macroeconomic stability, which primarily refers to the stabilisation and reduction of the external and public debts.
In 2006, the external debt is expected to be EUR25.5 billion, or 79.7 per cent of GDP, and in 2008 EUR28.7 billion or 77.7 per cent of GDP.
The government says it remains committed to reducing the state's share in the external debt and to continue financing the majority of the budget deficit on the domestic market. The government says the annual growth of the external debt is currently below 10 per cent and that this is the lowest annual growth in the last three years.
The public debt, which in 2004 was 50.5 per cent of GDP, is expected to be reduced from this year's 49.9 per cent to 46.7 per cent of GDP in 2008. Significant changes are also expected by changing the internal-external public debt ratio.
The government has announced the refinancing of the old external debt on the domestic market which, thanks to the mobilisation of foreign reserves, is expected to help reduce the external debt.
The increase in loans to citizens, which was cut from 28 per cent in 2003 to 19 per cent in 2004, is expected to be more moderate in the future but sufficient to support the moderate growth in personal consumption.
The current account deficit, which for this year has been projected at 4.5 per cent of GDP, is expected to be reduced to about 2.3 per cent of GDP in 2008.
Structural reform envisages the strengthening of the tax administration, the improvement of the investing climate, and the continuation of the restructuring and privatisation of public companies. The privatisation of companies from the Croatian Privatisation Fund portfolio whose majority owner is the state is expected to be completed by the end of 2007.
The government remains committed to the viability of the pension system in which pensions will be adjusted to the growth of salaries and costs of living.
The health sector remains another government priority with an improved financial discipline and cost control.
Other priorities are the judicial reform, the reform of the education system, and investing in science, which by 2007 is expected to be one billion kuna higher than in this year's budget.
According to projections, budget revenue in 2008 is expected to be 99.2 billion kuna, while tax revenue is expected to grow from 52.4 billion kuna in 2006 to 58 billion kuna in 2008.
(EUR1 = 7.3 kuna)