The state's arrears currently amount to 1.2 billion kuna, of which one billion refers to the health sector, according to Finance Ministry figures.
The amount of arrears due for payment is stable and expected, but an increase of 300 million kuna is possible due to lateness with the health reform, the Ministry said.
Given that at the end of last year the amount of arrears was about one billion kuna, every amount above that, including the aforementioned 300 million, is included in this year's budgetary deficit.
Under a modified accounting principle, which was introduced in 2002 and was agreed within a stand-by arrangement with the International Monetary Fund in February 2003, the deficit includes annual changes in arrears.
At the end of 2003 arrears amounted to one billion kuna, at the end of 2004 they were 1.3 billion and at the end of last year they stood at one billion kuna.
Changes in arrears affect the deficit, so that an increase during one year becomes part of that year's deficit, but only the amount of the increase.
By explaining the accounting of the deficit, the Finance Ministry answered last week's criticisms from the deputies of the strongest opposition party, the Social Democrats, who, during a parliamentary debate on the execution of the budget in this year's first half, criticised the government for covering up negative economic indicators, including the growth of inflation, insolvency and the deficit.
Finance Ministry figures show that the general government deficit, according to the modified accounting principle, amounted to 12.2 billion kuna in 2003, or 6.2 per cent of GDP. The deficit planned for this year is 7.3 billion kuna or three per cent of GDP.
The Ministry declined to comment on reports of 10.3 billion kuna claimed from the state in damages, saying it had not yet received any information that it had to pay something or plan it as budgetary expenditure.