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Government approves budget; deficit cannot exceed 5bn Sk

Vladimír Mečiar's cabinet at a November 14 special session approved a draft version of the 1998 state budget passing it onto Parliament. However, the budget is expected to encounter serious difficulties in the chamber, since two ministers from the Slovak National Party (SNS), the smallest party in the coalition, didn't support the draft.
Budget income is expected to be 179.8 billion Sk, a 5.1 percent increase over the last year, while expenditures are expected to reach 184.8 billion Sk, growing only 1.1 percent compared to 1996.
"The coalition agreement is that a deficit of 5 billion crowns must not be exceeded," Finance Minister Sergej Kozlík told a press conference after the draft was approved, articulating the government's fear of widening the budget deficit too much in an election year. Kozlík added that the government wants to save money by cutting ministries' capital expenditures by 35 percent and reducing operational expenditures such as purchase of goods and services.


Economic architects. Finance Minister Sergej Kozlík (left) and National Bank Governor Vladimír Masár debate the budget.
Vladimír Hák

Vladimír Mečiar's cabinet at a November 14 special session approved a draft version of the 1998 state budget passing it onto Parliament. However, the budget is expected to encounter serious difficulties in the chamber, since two ministers from the Slovak National Party (SNS), the smallest party in the coalition, didn't support the draft.

Budget income is expected to be 179.8 billion Sk, a 5.1 percent increase over the last year, while expenditures are expected to reach 184.8 billion Sk, growing only 1.1 percent compared to 1996.

"The coalition agreement is that a deficit of 5 billion crowns must not be exceeded," Finance Minister Sergej Kozlík told a press conference after the draft was approved, articulating the government's fear of widening the budget deficit too much in an election year. Kozlík added that the government wants to save money by cutting ministries' capital expenditures by 35 percent and reducing operational expenditures such as purchase of goods and services.

Kozlík's ministry has recently decided to cook the accounting books, changing the methodology of recording the budget deficit as only a fiscal deficit, which is a total budget shortfall deducted of debt principal payments. The ministry argued that the move was taken in order to conform with the International Monetary Fund's (IMF) regulations and the usual practice of keeping track of deficit s in developed countries.

Nevertheless, the ministry can not disguise the fact that in 1998, Slovakia will have to pay a principal of 46.3 billion Sk and interest of 15 billion Sk on the debts made by the current government over the past three years.

"[The government] should realize that every debt has to be paid back one day," said Vladimír Masár, National Bank of Slovakia's (NBS) Governor. "This approach ought to be adopted also while constructing a budget or when viewing a foreign debt."

Both the NBS and IMF are rather skeptical about the government's predicted net shortfall, anyway, expecting it to be 21 billion crowns, which equals 3 percent of GDP.

That deficit may start growing at the next parliamentary session in December, when the '98 budget will be hotly disputed. Both ministers for the SNS, Education Minister Eva Slavkovská and Defense Minister Ján Sitek, refused to support the draft, asking for more money for their departments.

"Even though we don't have money, the country's education and defense must be supported," said the SNS vice-chairman Anna Malíková, directly criticizing Social Affairs Minister Oľga Keltošová's ministry of receiving too much. "I know that elections are approaching and voters are voters, but I do believe that it's time to care for the nation's interests."

This is one indicator that the budget will have serious difficulties to pass unless SNS demands are satisfied. Sitek already told the opposition daily Sme that he believes his party will get its way. "I'm convinced that I will persuade the HZDS deputies," he said.

The opposition, which doesn't have much chance to hamper the bill's easy passage at the parliament if coalition deputies stay disciplined, is confined to watch the coalition fights from a distance. "Mečiar's government is between a rock and a hard place," said Mikuláš Dzurinda, the leader of the Slovak Democratic Coalition (SDK). "On one hand the budget is inflating and elections are coming closer. The brain says to save money, but [the government's] populism commands to spend."

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