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Budeting in Belarus - Elena PECHAN, Belarus

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This presentation was made by Elena PECHAN, Ministry of Finance, Belarus, at the 15th Annual Meeting of OECD-CESEE Senior Budget Officials held in Minsk, Belarus, on 4-5 July 2019

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Budeting in Belarus - Elena PECHAN, Belarus

  1. 1. Public Finance Management of the Republic of Belarus: fiscal policy and ongoing reforms Elena Pechan, Head of Budget Policy Department Ministry of Finance of the Republic of Belarus July 4, 2019
  2. 2. General information Sources: National Statistical Committee, National Bank  Government type: presidential republic  Population: 9,5 mln people (men – 46,6%, women – 53,4%; urban population - 78%, rural - 22%)  Capital: Minsk – 1,9 mln people  Languages: Belarusian, Russian  Currency: Belarusian ruble (BYN)  Open, export-oriented economy: in 2018 Belarus supplied its goods to the 178 countries of the world  The main trading partners: Russia - 49.2% of the volume of trade in 2018, the EU countries - 24%  Human Development Index: a group of countries with a high level 0.808 (53rd in the world in 2018)  Position in the “Doing Business” rating: 37th place 2 2
  3. 3. Key macroeconomic indicators Sources: National Statistical Committee, National Bank Strengthening of gold reserves billion USD -0,4% -10,1% -6,7% -3,2% -3,3% -1,7% 2013 2014 2015 2016 2017 2018(о) Reducing the current account deficit Current account balance,% of GDP ≥7,1 6,7 5,1 4,2 4,9 7,3 7,2 2013 2014 2015 2016 2017 2018 2019 Inflation CPI,% ≤5,0 % 16,5% 16,2% 12,0% 10,6% 4,6% 5,6% 2013 2014 2015 2016 2017 2018 2019 GDP growth billion USD /% 3 3 75 79 57 48 55 60 63 1,0 1.7 -3.8 -2.5 2.5 3,0 4,0 -6 -4 -2 0 2 4 6 0.0 20.0 40.0 60.0 80.0 100.0 2013 2014 2015 2016 2017 2018 2019(п)
  4. 4.  Budget formation using as an anchor budget rule – debt rule  Maintaining an optimal level of tax burden on the economy  Harmonization of tax policy in the EAEU countries  Ensuring the sustainability and balance of the republican and local budgets  Reducing external public debt and improving the efficiency of public debt management  Development of budget revenues administration institute  Saving the social vector of budget expenditures  Expansion of regulatory methods of budget planning The main priorities of fiscal policy 4 4
  5. 5. Budget structure of the Republic of Belarus Consolidated budget of the General Government State extrabudgetary funds Social Security Fund State extrabudgetary fund of civil aviation State extrabudgetary fund of the Department for the Execution of Sentences State extrabudgetary fund of universal service of the Ministry of Communications Consolidated budget Republican budget Local budgets (1 308 budgets) Primary level budgets Rural (1 151) Settlement (8) Urban (cities of district subordination) (14) Base level budgets District (118) Urban (cities of regional subordination) (10) Regional level budgets Regional budgets (6) Minsk budget 5 5
  6. 6. Justification of reform. Goals of reform STRATEGY IMPLEMENTATION Project implementation monitoring PEFA-based public financial management performance assessment STRATEGY APPROVED Interdepartmental Council established 6 The Strategy of Public Finance Management Reform
  7. 7. 1. Improving the sustainability of the budget and its compilation in accordance with the objectives of the policy. Development of Medium-Term Results-Based Budget Planning 2. Improving budget execution. Improving the quality of liquidity management 3. Optimization of intergovernmental relations 4. Increasing budget transparency 5. Improving the system of financial control and implementation of performance audit 6. The introduction of modern technology (the development of a new Integrated Public Finance Management Information System ) 7The main directions of improving the system of public finance management
  8. 8. Debt rule - debt ratio to GDP (legislative threshold of 45%) 12.4 13.6 16.7 16.9 16.7 5.2 5.2 4.7 4.1 4.0 external debt internal debt 31,4% 39,2% 39,1% 35,4% 34,8% 2015 2016 2017 2018 01/05/2019 Legally established threshold – 45% Internal and external debt, billion USD State debt, % of GDP Maastricht criterion – 60% 8 8
  9. 9. Budget balance (deficit (surplus) of consolidated and republican budgets to GDP) 9 0,2% 1,0% 1,8% 1,3% 2,8% 3,8% 1,1% -0,4% 0,7% 1,7% 1,1% 2,6% 3,8% 1,3% -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 consolidated budget republican budget 2013 2014 2015 2016 2017 2018 2019 (plan)
  10. 10. Revenue rule- the level of tax burden should not exceed 26% of GDP Tax burden (% of GDP) 29.8 29.7 28.2 30.6 30 29.9 31 29.2 26 25.4 24.3 25.6 25.1 24.9 25.9 24.7 2012 2013 2014 2015 2016 2017 2018 2019 level of centralization of financial resources tax burden The main components of the tax burden: tax on profit (18%) VAT (20%, 0% for export) tax on property (1-2,5%) tax on income (13%) Excises and customs duties 10 10 The priorities of tax policy for the medium term: - stability of tax legislation - assessment of the effectiveness of tax incentives and the abolition of ineffective tax incentives
  11. 11. Consolidated budget expenses 11 Expenses (2018 report) (COFOG) Expenses (2018 report) (economic classification) Expenditures in 2019: 36.4 billion rubles ($ 17.9 billion) 36,2 % wages, pensions, scholarships 21 % goods and services 7,1 % debt service 17,9 % transfers and subsidies 17,8 % capital expenditures Strengthening of social orientation of expenses General public services 24,9% Economic affairs 14,5% Health 14,8%Education 17,0% Social protection 7,9% Other expenses 20,9%
  12. 12. Structure of the medium-term financial program Section 1. The main macro-parameters of socio-economic development GDP GDP growth rate CPI refinancing rate US dollar exchange rate oil price others Section 2. Debt Limit Debt ratio to GDP Section 3. Key budget parameters revenue the maximum amount of expenses (including in the context of program and non- program) surplus Section 4. Limits of budget expenditures by state programs and subprograms: 1. socio-economic programs 2. scientific and technical programs 3. research programs 4. national security programs 5. investment program 12 The formation of medium-term financial programs is carried out on a rolling basis for three years (at the republican and local levels).
  13. 13. Program-based budgeting Social and economic programs (98.6% of consolidated budget program expenditures) (21 programs and 86 subprograms) Scientific and technical programs (0.2% of consolidated budget program expenditures) (16 programs) Research Programs (0.4% consolidated budget program expenditures) (12 programs) National Security Programs (0.8% consolidated budget program expenditures) (15 programs) 13 13 1. Legislative base 2. The list of programs is defined (approved by the Government in coordination with the President) 3. Direct and final results are monitored by evaluating the achievement of the target indicators in the programs. 4. Information on program expenditures, planned and achieved results are available to the public. 2014-2015 – 16% COVERAGE OF EXPENSES 2018 – 59,9%
  14. 14. Improving the quality of liquidity management 14 Task: Increase the level of consolidation of extrabudgetary funds of state bodies on the Single Treasury Account (STA) (remaining at their disposal in accordance with the legislation) Indicator: decrease in balances of funds outside STA Baseline: extrabudgetary funds of state bodies outside STA - 11% of the republican budget expenditures 2018 – 7,4 % 2019 (prediction) – 7%
  15. 15. Budget rules at the local level Deficit rule Debt rule Funds allocation rules 15
  16. 16. Deficit rule Debt rule Funds allocation rules Budget Code Law on the republican budget Decisions of local Councils of Deputies Budget Code Decisions of local Councils of Deputies Budget Code Law on the republican budget Decisions of local Councils of Deputies i. annual budget deficit limit ii. the possibility of involving accumulated residues i. debt limit ii. limiting the cost of servicing and debt repayment iii. borrowing only on the domestic market iv. warranty terms i. distribution of expenditure responsibilities ii. distribution of tax and non- tax revenues by budget levels iii. interbudgetary relations Budget rules at the local level (continued) 16
  17. 17. Interbudgetary relations Regulation of interbudgetary relations is carried out by: 1. standard setting deductions from republican taxes, fees (duties) as well as from local taxes and fees 2. provision of interbudgetary transfers 3. provision of budget loans Other interbudgetary transfers Subventions (for targeted expenses) Donations (for a balanced budget) Interbudgetary transfer system 17
  18. 18. … annually … on a permanent basis Installed...Distributed… … according to the regulations and rules established by the Budget Code 100% 50% 40% 20% 10% 30% income tax tax on profits non-tax revenue donations subventions VAT other tax revenue 90% 80% 70% 60% taxes on property The basis of local budgets is revenue which size depends on the contribution of local authorities in the economic development of the region 18
  19. 19. Inthebudgetlegislationisfixed: Sources of formation of budgets of various levels and standards for deductions of taxes and fees paid to them The establishment of uniform norms of deductions from the income tax and tax on profit The distribution of VAT based on population Prevention of changes in the norms of deductions from republican and local taxes and fees for 3 years Uniform rules for revenue sharing between the budgets  income tax  profit tax of utility and non- governmental organizations  land tax  property tax 100% enrollment in local budgets: 19
  20. 20. 20 The main features of interbudgetary relations 33.9 33.8 31.4 28.9 23.5 20.3 20.1 19.0 20.6 0.0 10.0 20.0 30.0 40.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 Donations 72% 28% Structure of interbudgetary transfers Donations Subventions and other interbudgetary transfers % of revenue local budgets 20
  21. 21. Budget self sufficiency 66,9% 90,2% 62,5% 64,3% 72,7% 71,2% г. Минск 99,1% 21
  22. 22. • The principle of openness and transparency of the budget system. • The official websites of the relevant state bodies and organizations ensure openness of budget information to the public and the media. • Citizens are guaranteed the right to receive, store and distribute complete, reliable and timely information on the activities of state bodies on political, economic, cultural and international life, the state of the environment. • State bodies, officials are obliged to provide the citizen of the Republic of Belarus with the opportunity to familiarize themselves with materials affecting their rights and legitimate interests. Budget Code of the Republic of Belarus: Constitution of the Republic of Belarus: Transparency of budget information 22 22
  23. 23. Official website of the Ministry of Finance of the Republic of Belarus. Open data. ‘The openness of the budget ’ section Analytical reports “The state of public finances of the Republic of Belarus" Bulletins on the execution of the consolidated, republican and local budgets (quarterly and annual) Budget for citizens (2018, 2019) Budget guide (interactive universal report) Interactive information maps on the execution of local budgets Ministry of Finance Costs F E E D B A C K Budget legislation The main directions of fiscal and tax policy The Strategy of public finance management reform Government finance statistics (annual and quarterly reports) Publications and speeches Comments on specific issues of budget legislation 23
  24. 24. The Ministry of Finance has approved a high-level design of the Unified Chart of Accounts (UCA) integrated with the Budget classification Further steps development of an UCA integrated with the Budget classification and financial reporting forms based on IPSAS preparation of transitional tables and guidelines on the use of the UCA integrated with the Budget classification and preparation of financial statements Steps taken A comparative analysis of the existing national system of accounting and reporting in the public sector with IPSAS The Government approved the Concept of reforming the national accounting system and reporting Alignment of the national accounting and reporting system of the general government with international public sector financial reporting standards (IPSAS) Improving the accounting and reporting system in the public sector 24 24
  25. 25. 2019 - Development of the draft Concept of modernization of internal financial control and audit in the public sector of the Republic of Belarus and a plan of measures for its implementation. 2020 - Government approval of the developed Concept - Implementation of internal financial control and audit in the public sector - Professional development of personnel in the field of financial control and performance audit 2021 - Strengthening control over the effectiveness of the use of budgetary funds, state property, reliability of reporting on the results of the implementation of government programs The introduction of a qualitatively new approach in the organization of internal financial control 25 25
  26. 26. New Integrated Public Finance Management Information System (IPFMIS) Improving the methodology of planning and execution of the budget Improvement of the national system of accounting and reporting in view of IPSAS Development of a New Integrated Public Financial Management Information System 26 centralized approach to the storage and processing of information use of modern web technologies flexibility and adaptability to changing requirements integration of IPFMIS with other information systems legally relevant secure electronic document management implementation of information and analytical decision support tools 26

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