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Ministries to face big spending cuts in 2007

Hungary's ministries will be forced to reduce spending 10-15% next year, according to a government directive to ministries on budget planning, dailies Napi Gazdaság and Magyar Hírlap reported on Tuesday, citing a leaked document. The government must submit next year's budget bill to Parliament by October 31. In Hungary's convergence program, submitted to Brussels on September 1 and to be assessed by the European Commission today, the government says it will reduce the general government deficit, based on EU accounting standards to 6.8% of GDP in 2007 from 10.1% of GDP in 2006. The two-page document leaked to the papers shows that most ministries' budgets will be cut severely. Among the exceptions are the Health Ministry, where spending would rise 8.9% to Ft 55 billion, and the National Development Agency, which manages EU development funding, where spending could rise by a third to Ft 45 billion. The budget of the Prime Minister's Office is set to rise a sharp 38.3% to Ft 48 billion, but the rise mainly reflects a reorganization of tasks: a new central unit to be set up at the office will take over human resources for all of the ministries. Napi Gazdaság also noted that mergers and restructuring of ministries under the new government after the April general election makes comparisons between the two years difficult. The Foreign Ministry, the Ministry of Agriculture and Regional Development and the Ministry of Education and Culture face the largest spending cuts, of 19.1%, 15%, and 14.5%, respectively, according to the document. A similar 13.8% reduction in expenditures is planned at the Ministry of Economic Affairs and Transport too. The reduction at the agriculture and economic ministries will be at least partly compensated by EU funds, Magyar Hírlap noted. Ministries are free to spend their own revenue but cannot count on additional central funding in the case they overestimated revenue or counted on a revenue increase above inflation. As in 2006, ministries will be required to set aside some of their budget to use as reserves in case of overshoots in 2007. The reserves may only be spent with special permission from the government. Ministries will be prohibited from accepting invoices from payroll staff, and they will no more be allowed to ask for a rescheduling of their tax or social security contribution obligations, the document shows. (Mti-Eco)