The 2007 budget aims to achieve balance as well as support reforms and developments, Finance Minister János Veres told Parliament on Thursday before submitting the government's draft 2007 budget for debate.
Reforms are necessary to help a sustainable reduction of deficit, and developments can help Hungary reach the level of other EU countries, Veres said. He stressed that developments must be made quickly, adding that Hungary would remain a net receiver of EU funds during the new 2007-2013 EU budgetary period.
Veres said the draft budget targets are the same as those in the convergence program, showing the general government deficit falling from an expected 10.1% in 2006 to 6.8% in 2007. Although taxes have been raised to narrow the deficit, reducing expenditures plays a bigger role in the fiscal adjustment in 2007, he said. Reducing spending requires not only government reforms but discipline, he said, noting that ministries will be required to set aside reserves which can only be released if targets are met.
The government has approved a proposal that will entirely restructure the organization of central budget institutions. "We are trying to boost the size of those institutions which operate as independent ones, aiming at an economy of scale, and eliminate useless ones," he said. Including layoffs made so far, the number of central budget employees will fall more than 7% in the coming years, he added. The cost of the layoffs has been included in budget reserves, he noted.
Resources available to local councils will increase 8% including EU funding, or 3.5% excluding funding for the Budapest public transport company BKV Zrt and the construction of the capital's planned fourth metro line. Development funding available, however, will increase by as much as 30%. At the same time, local councils must become more frugal, raising the number of hours teachers work and reducing remuneration for local council members.
In line with the convergence program, the budget bill targets balance in the state pension fund in 2007. Still, about 20% of the fund's revenue will come from the state, with the rest coming from employers and employees, he said. Austerity measures should affect pensioners the least, Veres said. He added that pensions would retain their real value in 2007, including the effects of a 4% nominal rise and an annual bonus.