Tough but socially oriented budget policy

07/04/18 15:41

Tough but socially oriented budget policy

Reducing government spending will not affect wages and pensions

Tiraspol, 4 July. /Novosti Pridnestrovya/. Supreme Council members approved in the first reading a 2018 and mid-term fiscal and tax policy concept.

"For the first time in recent years, targets have been set, on the basis of which the government's economic policy will be built," said Alexander Korshunov, chairman of the parliamentary committee on economic policy, budget and finance, commenting on the concept.

The document, on the basis of which the 2019 budget will be made, was presented at a plenary session of the parliament by Minister of Economic Development Sergey Obolonik.  Its draft concept reflects the government's plans for the next few years. The economic policy will be based on limited spending on current consumption while increasing the proportion of capital investment in social infrastructure (from 0.1 to 1.5 % of GDP). The Capital Investment Fund has been created this year to finance the renovation and construction of social facilities.

In general, the government plans to cut spending from 49.1% of GDP (in 2016) to 41.3% by 2020. The spending structure will change, but the budget will remain socially oriented. The concept also provides for an increase in salaries in the spheres of education and healthcare.

This will be achieved through a strict budget policy and an increase in the overall volume of the economy. Therefore, as Sergey Obolonik noted, despite the decline in the state expenditures to GDP, their amount will increase.

"Reducing public sector expenditures and the budget deficit relative to the size of the economy over the medium term is planned mainly due to the expansion of the tax base and economic growth at its nominal pace of about 8-7.5% per year," the document stipulates.

This growth must be promoted, among other things, by reducing the tax burden on the real sector. Income tax rates have been reduced in various industries since 1 January 2018. In the future, the government, according to Obolonik, intends to apply a fair approach to the distribution of the tax burden. The draft concept also assumes that it will not exceed 28% of GDP, whereas in previous years it fluctuated between 30-34%.

 

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