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Govt to Drastically Reduce Deficit by Freezing Human Sector’s Funds

Gábor Sarnyai 2019.01.25.

The government has ambitious plans for reducing the budget deficit and state debt. However, if the improvement of fiscal indicators continually remains in focus, there won’t be enough room to invest in education and health care.

The government aims to reduce Hungary’s state debt as a percentage of GDP to fewer than 60% by 2022, Finance Minister Mihály Varga revealed. It also wants to make payroll taxes the lowest in the region by that date.

Source: “Az államháztartás (maastrichti) adóssága”

State debt increased significantly during the reign of the Socialist governments between 2002 and 2010. It grew from 55.6% in 2002, to 80.2% by the end of the second socialist term in 2010. When Fidesz came to power in 2010, reducing the debt wasn’t only an economic necessity, but also a way of fighting the bad heritage left behind from the previous eight Socialist years.

The new constitution called the Fundamental Law was ratified in April 2011, and enacted on January 1, 2012. It requires that all government budgets reduce Hungary’s public debt until it is below 50 percent of the GDP.

The level of debt might come closer to 60 percent

Although the general government budget balance is projected to remain in the red, the government expects a significant reduction in the deficit over the following years. The ambitious target is reducing the current 1200 billion to 414 billion by 2020 and a year later to 221 billion.

Mihály Varga is a Hungarian politician, current Minister of Finance.

As a result, the public debt-to-GDP ratio would fall from this year’s planned percentage of 70 to 66.4 percent next year, eventually reaching 62.7 percent by 2021. The government calculates based on EU methodology (ESA). According to this method, the deficit-to-GDP ratio may fall from 1.8% this year to 1.5% in 2020 and 1.2% in 2021.

No money left for human resources

The government decision detailing the corner numbers for the 2020 and 2021 budgets has been published. The government plans to essentially freeze expenditures covering the budget of Ministry of Human Resources (EMMI) and reduce the expenditures of the Ministry of the Interior. The Interior Ministry manages the salaries of public workers and is considered to be a welfare-like program in Hungary.

Wage Freeze in the Public Works Scheme Continues in 2019

EMMI’s budget is 3 496 billion HUF for 2019 and 3 582 billion and 3 478 billion for the years to come. As a result, the budget of the ministry responsible for education and health care will stagnate.

Via: Napi.hu/Hvg.hu