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Fiscal Council plans bill to raise 2016 spending, revenue by HUF 401 bln

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The Fiscal Council yesterday said it has “no fundamental objections” to a draft amendment that would raise both the expenditure and revenue side of this yearʼs budget by HUF 401.3 billion, Hungarian news agency MTI reported today.

The favorable development of tax bases, the high degree of utilization of the growth tax credit, taxpayer discipline and more efficient tax collection provide the coverage for the increase on the expenditure side, the Council said, according to MTI. 

The Council issued its opinion on a draft bill it received from the National Economy Minister on April 25. 

The 2%-of-GDP deficit target appears achievable, even with the higher expenditures, the Council said. Year-end state debt as a percentage of GDP, at unchanged exchange rates and adjusted for the effect of pre-financing for European Union funding, is set to fall, as well, in line with the law, it said. The Council noted, however, the importance of observing the development of the debt ratio calculated according to EU rules in order to prevent a possible widening of the cashflow deficit because of the pre-financing for the EU funding. 

The Council reportedly said it supports the draft billʼs intent to raise reserves. 

The rise in fiscal expenditures will support an increase in the investment rate, and its extraordinary nature will not put the sustainability of the fiscal balance at risk, the Council said. It also acknowledged the planned financial consolidation of the system of educational institutions, MTI reported. 

In a separate statement issued late Thursday, the National Economy Ministry said favourable economic trends in the past months point to a “significant revenue surplus” over the earlier budget target, leaving the government with “close to HUF 500 bln” in additional resources. 

“The room for fiscal manoeuvre this year has grown thanks to the favorable economic environment and productive economic policy,” the ministry said, according to the news agency. “It is the governmentʼs aim that these tangible results be experienced by everybody,” it added. 

The government will top up funding for education by HUF 91.6 bln, for vocational and continuing education by HUF 17.7 bln, for home purchase subsidies by HUF 50 bln and for the Modern Cities Program by HUF 50 bln, the ministry said. It will also raise fiscal reserves by HUF 30 bln and allocate HUF 12.2 bln for local councils that were excluded from an earlier debt consolidation program. 

The ministry noted that this yearʼs deficit target, calculated both according to cashflow-based as well as the EUʼs accrual-based accounting rules, would remain unchanged, MTI added.

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