ZAGREB, Nov 15 (Hina) - The government has reduced the state deficit for next year to 5.15 percent of the Gross Domestic Product (GDP) while the International Monetary Fund (IMF) has requested that the deficit be reduced so as not to
exceed five percent, which means the government needs to save a further 33.33 million euros.
ZAGREB, Nov 15 (Hina) - The government has reduced the state deficit
for next year to 5.15 percent of the Gross Domestic Product (GDP)
while the International Monetary Fund (IMF) has requested that the
deficit be reduced so as not to exceed five percent, which means the
government needs to save a further 33.33 million euros. #L#
The problem of the state deficit was the most contentious issue in
this week's discussions between the government and an IMF mission,
which were almost discontinued. The mission ended its visit to
Croatia in the middle of this week.
The IMF demanded that the deficit be reduced to 4.8 percent of GDP.
Eventually, a general agreement was reached that the deficit could
account for five percent of GDP.
The IMF mission announced another visit for early December,
expressing hope that negotiations on a new stand-by arrangement
could be completed then. The government has time by the next mission
visit to find ways to implement measures to reduce the deficit to
account for five percent of GDP.
This means that the government will have to find a way to save around
33.33 million euros. Some government members consider that money
should be saved by reducing ministry funds instead of reducing
investments. Budgetary funds can be saved by making reforms more
effective, particularly those in the defence system, and by solving
the problem of redundant defence staff.
If budgetary funds are not saved, investments may be reduced,
however, some government members say that investments in road
construction, railway modernisation, and in the power sector will
help achieve the planned growth rate of five percent next year. Road
construction, they say, is a significant generator of other
economic activities.
The question of the deficit and how to decrease it is related to the
need to decrease debts as demanded by the IMF. A state deficit of
more than five percent would mean that debts are not being decreased
while a deficit of less than five percent would mean that the debt is
stagnating or is in fact being decreased.
According to the latest data, Croatia's foreign debt amounts to
around US$13.2 billion, of which the state debts account for around
US$5.8 billion.
Senior government officials say the question of decreasing the
state deficit is the question of whether or not Croatia wishes a new
stand-by arrangement with the IMF.
The new stand-by arrangement would be valid for one year only, or
rather, until the end of the incumbent government's mandate. The
stand-by arrangement is not being sought for the sake of money but
because it would confirm the government's programme, meaning a more
favourable position on the international financial market, lower
interest rates, etc.
(hina) sp rml sb