IMF: Decentralization means budget deficit

IMF representative Bogdan Lissovolik warned over the weekend that adopting a decentralization proposal would entail a higher state budget deficit.

Izvor: Beta

Monday, 13.06.2011.

09:41

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IMF representative Bogdan Lissovolik warned over the weekend that adopting a decentralization proposal would entail a higher state budget deficit. IMF: Decentralization means budget deficit The decentralization proposal was submitted by former Economy Minister Mladjan Dinkic's United Regions of Serbia (URS). In an interview for Belgrade's Politika daily, Lissovolik said that the IMF was not in essence against decentralization, but that this specific proposal which has been handed to the Serbian parliament, could come at quite a cost to the consolidated budget. He also said that the IMF firmly believed the Fiscal Council had correctly rate the proposal as being bad, on account of its projected effect on the budget deficit. The Fiscal Council said that the amendments to the Law on Financing Local Government threatened to cause the budget deficit to grow by 1.1 percent of GDP, or nearly RSD 40bn in 2012. The Fiscal Council has rightly pointed out that filling this gap will necessitate draconian measures like freezing salaries and pensions again, the IMF representative said. The United Regions of Serbia has denied that its proposal was harmful in the way described above and explained that the motion was intended to achieve "a more functional and just redistribution of existing funds from the level of the republic to towns and municipalities, where the smallest and poorest municipalities will have the most to gain." The proposal, the United Regions of Serbia said, envisages a substantial increase in funds for local administration, yet reduces both revenues and expenditures on the state level.

IMF: Decentralization means budget deficit

The decentralization proposal was submitted by former Economy Minister Mlađan Dinkić's United Regions of Serbia (URS).

In an interview for Belgrade's Politika daily, Lissovolik said that the IMF was not in essence against decentralization, but that this specific proposal which has been handed to the Serbian parliament, could come at quite a cost to the consolidated budget.

He also said that the IMF firmly believed the Fiscal Council had correctly rate the proposal as being bad, on account of its projected effect on the budget deficit.

The Fiscal Council said that the amendments to the Law on Financing Local Government threatened to cause the budget deficit to grow by 1.1 percent of GDP, or nearly RSD 40bn in 2012.

The Fiscal Council has rightly pointed out that filling this gap will necessitate draconian measures like freezing salaries and pensions again, the IMF representative said.

The United Regions of Serbia has denied that its proposal was harmful in the way described above and explained that the motion was intended to achieve "a more functional and just redistribution of existing funds from the level of the republic to towns and municipalities, where the smallest and poorest municipalities will have the most to gain."

The proposal, the United Regions of Serbia said, envisages a substantial increase in funds for local administration, yet reduces both revenues and expenditures on the state level.

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