Finance Think: Instead of increasing capital expenditures, focus on spending efficiency


Commenting on the 2021 budget review, Finance Think said that it was “the biggest plan in the existence of the state that should provide post-pandemic stimulus to the economy”, but still, according to them, the rebalance indicates insufficient will to cut unproductive spending and increase of capital expenditures beyond the ability of institutions to implement capital projects and to a significantly smaller extent, as was the case in the pre-pandemic period.

Capital investments are the key factor for stimulating economic growth in the long run, which in turn will be particularly important in the post-COVID-19 period. However, the pandemic has caused significant changes in fiscal capacity. On the one hand, the need for urgent spending to deal with the crisis has increased, and on the other hand, revenues have decreased, which has resulted in an increase in the budget deficit and public debt. In that direction, instead of inflating the capital expenditures, it is necessary to focus on the efficiency of spending, but also on the effectiveness, in terms of prioritization and investment in capital projects that will give the greatest effect and impact on economic growth, says Finance Think in its commentary and indicate that it has already alerted about the tendency of the supplementary budget from the previous year for limited cuts in unproductive spending and serious cuts or inflated spending on capital expenditures.

Finance Think adds that in it analysis on the expenditure side of the budget in a dynamic context for the last six years, in order to understand the similarities and differences of the reviews over the years, it can be noticed that each review of the initial budget for the selected period is a maximum +/- 1.5 percent. But, on the other hand, each new budget records significant growth rates in the range of 4 to 8.6 percent, except in 2021, when the budget is lower than the previous year’s rebalance by 2.1 percent.


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