Fiscal Council clears 2016 budget draft but proposes revision of debt reduction rule
Hungary’s Fiscal Council said on Friday, May 8 that it had cleared the government’s draft for the 2016 budget bill but added that it proposes a revision of the debt reduction rule stipulated by the Stability Act in order to harmonize fiscal stability aspects with sustainability of economic growth.
The debt reduction rule specified in the Stability Act, enacted on January 1, 2015, is to first be applied when drafting the 2016 budget bill. According to the rule, calculating with the inflation and economic growth rates targeted for 2016, government debt should only grow by 0.35% whereas the debt is projected to grow by 3.3% in nominal terms.
The difference is more than HUF 700 bln; therefore, the application of the rule would require a substantial adjustment of the budget. The Fiscal Council said economic growth in 2015 could be around 3%, helping to fulfill the central budget’s revenue targets and this year’s 2.4% deficit target.
The 2016 draft budget is based on 2.5% economic growth, which the Fiscal Council considers well founded. The Fiscal Council received the draft from the government on May 1. The Council has to publish its opinion or possible disagreement with the budget draft before the government submits it to parliament.
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