CROATIAN FINANCE MINISTER PRESENTS DRAFT 1998 BUDGET ( Editorial: --> 1476 )

( Editorial: --> 1476 ) ZAGREB, Nov 17 (Hina) - Croatian Finance Minister Borislav Skegro held a news conference in Zagreb on Monday to present the draft state budget for 1998. The proposed budget of 38.8 billion kuna (US$6.46 billion)is the "healthiest" budget so far in terms of structure and volume of expenditure and it will encourage economic growth, Skegro said. The budget reflects the policy of further restructuring and privatisation and is expected to lead to a rise in the standard of living next year. Skegro said expenditures for the defence and interior ministries and for displaced people would be diverted to science, culture, agriculture and infrastructure. The 1998 draft budget is 8.5 percent higher than this year's. The next year will be burdened with the repayment of foreign loans and interest, which will amount to 1.2 billion kuna ($200 million). Despite this, the budget deficit of 1.6 percent of Gross Domestic Product will account for only 50 percent of what is foreseen by the Maastricht criteria, Skegro said. The main characteristic of the 1998 budget is reducing the tax burden. The budget envisages reduction of the total amount of taxes from 27.32 percent of GDP this year to 25.96 percent next year. Tax reduction will amount to 1.7 billion kuna ($283 million). The introduction of the value-added tax (VAT) will contribute to relieving the tax burden. With the application of the VAT, the current 13.17 percent of budget revenues from the turnover tax on goods and services will be reduced to 11.98 percent next year. Another important feature of the budget is an expected increase in current budgetary savings of 2.9 billion kuna ($483 million), which will be directed towards capital investment. Total capital expenditures are planned to amount to 5.3 billion kuna ($883 million), which will be an increase of 17.2 percent compared to this year. With this kind of budget there should be no fear it would generate economic instability, Skegro said. Revenues from privatisation are planned to amount to 1.6 billion kuna ($266.6 million), which is expected to be received from the sale of state-owned shares. A portion of the revenues from the privatisation of public enterprises will be used for financing pension reform, for which 2 billion kuna ($166.6 million) is envisaged in the budget. The budget envisages 12.4 billion kuna ($2.06 billion) for wages, which is a 13.83 percent increase in comparison to this year. The government aims to decrease labour costs next year in order to increase employment, and will pay particular attention to curbing the grey economy. The budget was drafted on the basis of fiscal policy for a three- year period. Next year GDP is expected to grow above seven percent in real terms and ten percent nominally, with a rate of inflation of about three percent, Skegro said. (hina) vm jn 171833 MET nov 97