CRO VICE PREMIER, FINANCE MINISTER HOLD PRESS CONFERENCE ON 1997 D

D $ RAFT STATE BUDGET ZAGREB, 15 Nov (Hina) - The draft state budget for 1997 is oriented towards development and social issues; 4,2 billion kunas (1,2 billion DM) will be set aside for capital expenditures, while six to seven billion kunas will be earmarked for social care (1,7 to 2 billion DM), Croatian Vice Premier Borislav Skegro and Finance Minister Bozo Prka told a press conference in Zagreb on Friday. Budgetary revenues should amount to 32,7 billion kunas (9,3 billion DM), which is 5,05% more than in 1996. Government expenditures should amount to 35,5 billion kunas, which will result in a 2,8 billion-kuna deficit. The deficit will be covered with 2,8 billion kunas which will come from a 6,8- billion-kuna loan which will come from foreign and domestic sources. The remaining 4 billion kunas will be set aside for the payment of debts in 1997. The total budget for 1997 should, therefore, amount to 39,4 billion kunas (11,2 billion DM). The budget envisages further disburdening of the country's economy, Vice Premier Skegro said. Income tax will be reduced. The share of taxes and contributions in gross wages and salaries will be below 50%, which is the basic aim of the disburdening strategy, Finance Minister Prka said. Gross national product (GNP) in the next year should amount to 108 billion kunas (30,8% billion DM), Vice Premier Skegro said, adding the share of the budget deficit amounting to 2,63% is better than Maastricht criteria. GNP should increase at the rate of 9 to 10% in 1997, while the rate of tax increase should be 5%. This difference in the increase of GNP will be used for the development of economic growth, Prka said. The developmental component reflects in planned capital expenditures amounting to 4,2 billion kunas, which, Prka said, makes 4% of GNP. He also said that 420 million kunas were set aside for the financial rehabilitation of Croatia's shipping, textile, timber and wood, metal and other industrial branches; 820 million kunas will be set aside for the financial reorganization of banks, while Croatia's farming is to be subsidized with 570 million kunas. Minister Parka described as worrying the fact that 957 million kunas are to be set aside for the subsidizing of the Croatian rail. According to Prka, 1,2 billion kunas will be set aside for the reconstruction, while 800 million kunas will be earmarked for the construction of the country's road infrastructure. This is less than in 1996, but it does not mean than less roads will be built, Prka said. The construction of Croatia's road system will only be approached differently, with a concession model, Prka said. Six to seven billion kunas are intended for social care, while 2,2 billion kunas will be set aside for the care for disabled war veterans; 455 million kunas will be set aside for the care for Homeland war and World War II disabled civilian victims; 800 million kunas will be used for the care for displaced persons. 1997 social care program will be financed with 450 million kunas, which is 40% more than in 1996. Almost three billion kunas will be spent for accelerated retirements. Another precondition for the financing of budget deficit is credit rating, which Croatia is expected to receive by the end of the year, after which it will enter the European market with two kinds of bonds, Prka said. According to the draft state budget, most revenue would come from turnover tax on goods and services (14,7 billion kunas). Answering to questions on the introduction of value added tax, Vice Premier Skegro said that value added tax should be introduced as of 1 January 1997, but it was realistic to expect that its introduction would be postponed until 1 January 1998. (hina) rm jn 151722 MET nov 96