Fiscal Council: 2020 Budget Well Drafted, Over Increase in Public Sector Pay Biggest Mistake

Pavle Petrovic (BETAPHOTO/MILAN OBRADOVIC)

The 2020 budget has been relatively well drafted, while the biggest financial mistake was an over increase in public sector wages of 9.6 percent, Fiscal Council President Pavle Petrovic said on Nov. 19.

While presenting the 2020 draft budget analysis and a revised fiscal strategy 2020-2022, Petrovic said that public sector wage should have been increased by up to 5.5 percent.

“Public sector wages are increasing faster than the economic activity due to which a large portion of expenditures envisaged by the 2020 budget has been decided in advance,” he noted.

He added that the remaining budget funds had been “mainly distributed well,” which was why the draft budget could be given a positive mark in principal.

The budget revenues have been planned well and conservatively and tax policy changes directed correctly, according to the Fiscal Council.

“Total expenditures have been planned approximately around revenues, with a budget deficit planned at around 0.3 percent of Gross Domestic Product (GDP), or RSD20 billion, which would lead to a foreign debt decrease,” Petrovic specified.

He also said that state power utility EPS was at a turning point and that the company needed strong changes in doing business along with urgent investments of some EUR600 million on a an annual basis, or EUR200 million more than the current level, that is, 50 percent more.

“From 2015 to 2018, EPS was reporting a profit of some EUR40 million, while profits posted by similar companies in Europe were ten times larger,” Petrovic noted, citing poor management, excess employees and high pays as main reasons.

He noted that next year, the average pay in EPS would be RSD100,000, describing it as extremely high.