"GDP growth can be even steeper than the 5 percent envisaged by us, so income will be higher too."
Miroslav Maxon, Finance, Budget, & Currency Committee chairman
"This will be very expensive money, considering the country's discount rate is 9.75 percent. I can find money on foreign capital markets for half that interest. This is throwing money out the window."
Mikuláš Dzurinda, Finance, Budget, & Currency Committee member
Slovakia's budget deficit for 1996 is projected to be 27 billion Sk, the highest in its four years of independently-planned budgets. That 27 billion Sk also takes a 5.1 percent chomp into the cabinet's GDP forecasts, causing some to question of whether these rising deficits are causing Slovakia to eat up its own future.
Miroslav Maxon (HZDS-RSS), the chairman of the committee for finance, budget and currency, said that won't happen. "By no means is the country eating up its future," Maxon said. "If you take out the 19 billion Sk that is used to pay off the principal, the deficit for next year is only 8 billion Sk, which is 1.5 percent of GDP. That is a very good macroeconomic indicator."
Mikuláš Dzurinda, a KDH MP and chairman of the KDH economic club, said the government was playing with numbers. "There is no doubt that the deficit is 27 billion and not 8 billion," said Dzurinda. "The truth be known, though, the state's internal indebtedness will rise by only 8 billion Sk. Only if the deficit is lower than the principal, we could say that internal indebtedness is dropping. But this deficit is too high."
Vladimír Mečiar, Slovakia's prime minister and chairman of the cabinet, repeatedly has called the 1996 budget "economical" as opposed to the way he termed last year's budget as "restrictive." Pork barrel or judicious spending?
While the truth may lie somewhere in between, the crux of the 1996 budget debate revolves around government spending, and whether the government needs to plow funds into public works projects when Slovakia's economy is growing steadily already.
Dzurinda said he is concerned about the "pork," as wasteful public works projects are nicknamed. He cites as examples the cabinet's projected 1.5 billion Sk reserve as well as with Mečiar's 0.3 billion Sk personal reserve.
And he wasn't satisfied with the explanations either. "At the [finance, budget and currency] committee session, Mr. Hrnek [NEED TITLE] from the Finance Ministry said that 'So far, the cabinet's reserve was oscillating between O.7 and 1.3 billion Sk, so we gave 1.5 billion this time,'" Dzurinda said. "I can never accept that."
And that's just one slice of the whole side of bacon, he added. "For example, there is a 4 billion Sk reserve for Slovenská Záručná Banka's (Slovak Guarantee Bank) development. For what development?" Dzurinda asked. "What will the bank do? These questions are not answered there and 4 billion is 2.5 percent of overall budget income."
There's more, Dzurinda claimed. "Then there is another 100 million Sk as capital investment for a new Rozvojová Banka (Development Bank). What kind of bank will that be?" he asked. "For development of what? Who will lodge another 400 million Sk needed to establish a bank? I didn't get an answer to any of these questions."
Maxon, for the coalition's part, thinks that the budget could have been "substantially more generous" on the spending side. "There is a group of experts working with our committee who suggested we could have been more generous," he said. "In their opinion, GDP growth can be even steeper than the 5 percent envisaged by us, so income will be higher too," said Maxon.
The 1996 deficit, Maxon said, includes public works projects that will further stimulate the economy. "The budget contains several stimuli, for example highway construction or regional development projects, to name but a few."
But Dzurinda, who was the transportation minister in former prime minister Jozef Moravčík's interim government, said there are no clear allocations in the budget for building highways. "The budget proposal only contains parliament's approval of a 3 billion crown government bond issue for the highway program," he said. "But this will be very expensive money, considering that the country's discount rate is 9.75 percent. I can find money on foreign capital markets today for half that interest. This is throwing money out the window."
The coalition's argument for a spending increase is that while next year's inflation is expected to stay within a 6-8 percent margin, budget expenditures are rising by 13.2 percent compared to 1995.
But Dzurinda is not so sure about whether the spending will be done judiciously. "The most important thing about public expenditures is their structure and allocation," Dzurinda said. "If there was a considerable share of investments in these budget expenditures, I would be tempted to subscribe to this theory. But considering that in the best of all fantasies there is about 5-6 billion Sk to finance these stimuli, what are we talking about then? It is only a loosening of the belt."
7. Dec 1995 at 0:00 | Daniel Borský