Draft:Government Budgeting in Slovakia

Government spending in Slovakia plays a pivotal role in shaping the nation's economy and societal well-being. As a central component of fiscal policy, government expenditure encompasses a wide range of activities aimed at providing public goods, services, and support to citizens. Understanding the dynamics of government spending is essential for comprehending the functioning of Slovakia's economy and its impact on various sectors and stakeholders.

In Slovakia, government allocates resources across diverse sectors, mainly education, healthcare, infrastructure, social welfare, defense, and many more. These expenditures are instrumental in driving economic growth, fostering social development, and improving living standards. Moreover, government spending serves as a mechanism for addressing socio-economic disparities, promoting equity, and enhancing the overall quality of life for citizens.

The significance of government spending in Slovakia's economy extends beyond the immediate provision of public goods and services. It also influences macroeconomic indicators such as GDP growth, employment rates, inflation, and fiscal sustainability. Government expenditure patterns reflect policy priorities, economic conditions, and societal needs, thereby shaping the nation's economic trajectory and social fabric.

Process of budget allocation

1. Revenue Estimation: The budget allocation process begins with the estimation of government revenue sources, including taxes, duties, grants, and other sources of income. Ministry of Finance analyzes economic trends, tax policies, and external factors to forecast revenue inflows for the upcoming fiscal year.
2. Expenditure Prioritization: After estimating revenue, the government prioritizes expenditures based on policy objectives, socio-economic needs, and strategic priorities. This involves consultations with various ministries, departments, and stakeholders to identify key areas requiring funding and to establish spending targets.
3. Budget Drafting: Government ministries and its subdivisions prepare detailed budget proposals outlining their funding requirements and programmatic priorities. These proposals are reviewed by various institutions such as ÚHP (value for money assesment) and RRZ (budget responsibility assesment) and integrated into the overall national budget framework, taking into account revenue projections and fiscal constraints.
4. Parliamentary Approval: The proposed budget is first approved by the Government of the Slovak Republic and then presented to the National Council of the Slovak Republic (parliament) for deliberation and approval. Parliamentary committees scrutinize budgetary allocations, conduct hearings with government officials, and make recommendations for revisions or amendments as necessary. The final budget is subject to parliamentary vote and requires majority approval for enactment.
5. Implementation Oversight: Upon parliamentary approval, the budget is implemented by relevant government agencies and departments according to allocated funds and programmatic targets. The Ministry of Finance monitors expenditure execution, ensures compliance with budgetary allocations, and provides periodic updates on budget performance to the parliament and the public.

Main areas of budget allocation

1. Education: Education receives a significant portion of the government budget (as of 2024 14.1% of the total budget) reflecting its importance in human capital development and economic competitiveness. Funding is allocated to primary, secondary, and tertiary education, including schools, universities, vocational training, and student support programs.
2. Healthcare: The government allocates funds to healthcare services, facilities, and public health initiatives to ensure access to quality healthcare for all citizens. This includes funding for hospitals, clinics, medical personnel, pharmaceuticals, disease prevention, and health promotion programs. As of 2024 healthcare accounts for 8.8% of the total budget.
3. Infrastructure: Infrastructure development is a key priority for the Slovak government to enhance connectivity, facilitate economic growth, and improve living standards. Budget allocations cover investments in transportation (roads, railways, airports), energy (power plants, grids), communication (telecommunications, broadband), and urban development projects. As of 2024 healthcare accounts for 7.3% of the total budget.
4. Social Welfare: Social welfare programs receive funding to support vulnerable populations, alleviate poverty, and promote social inclusion. This includes expenditures on pensions, social assistance, unemployment benefits, housing subsidies, childcare, and disability support services. As of 2024 healthcare accounts for 14.8% of the total budget
5. Defense and Security: Ensuring national defense and security is another important component of government spending. Budget allocations are made for defense forces, law enforcement agencies, border security, intelligence services, and emergency response capabilities to safeguard national sovereignty and protect citizens from internal and external threats. Together Ministry of Defense and Ministry of Internal Affairs account for approximately 14.8% of the total budget.

Other areas include : environment, culture, justice, foreign affairs and many more.

Current data

At the end of January 2024, the state budget reached a deficit of 93.2 million €. Compared to the same period last year, state budget revenues were higher by 114.4 million. EUR (+7.2%). State budget expenditures were also higher in the year-on-year comparison, by 267.1 million. EUR (+17.6%). This meant a year-on-year deterioration of the state budget by 152.7 million. euros (-256.4%).

Slovakia government spending to GDP

Government spending in Slovakia was last recorded at 47.9 percent of GDP in 2023 . Government Spending to GDP in Slovakia averaged 45.08 percent of GDP from 1993 until 2023, reaching an all time high of 78.80 percent of GDP in 1993 and a record low of 36.40 percent of GDP in 2007.

Spending reviews

The spending review, a customary practice in OECD nations, aims to enhance the achievement of public policy goals. It enables governments to pinpoint opportunities for more efficient use of public funds and identify potential savings required to fulfill national and European fiscal obligations.

This review evaluates the efficiency and effectiveness of expenditures, proposing strategies to maximize the value of public finances. Consequently, it facilitates fiscal savings, enhances public service outcomes, and enables reallocation of funds towards governmental priorities.

Collaborative teams from the Ministry of Finance and relevant sector ministries compile comprehensive reports, outlining improvement measures and action plans for implementation. These reports constitute an integral component of the standard budgetary procedure.

The examination of expenditures serves as a means to bolster the quality of public finances within both the Stability Program and the National Reform Program.

The State Final Account

The State Final Account of the Slovak Republic for the respective budgetary year is prepared by the Ministry of Finance of the Slovak Republic in accordance with § 29 of Act No. 523/2004 Coll. on Budgetary Rules of Public Administration and on Amendment and Supplementation of Some Acts as amended by later regulations. In line with the defined content framework, the document includes:

• Data on revenues, expenditures, and the result of budgetary management of public administration entities and on the state debt as of December 31 of the budgetary year, presented in a unified methodology valid for the European Union,
• Evaluation of the focus and measures of budgetary policy,
• Data on revenues, expenditures, and the result of budgetary management of the state budget,
• Other data on the budget execution of public administration.

The State Final Account is a document that, in summary, informs about the achieved balance and the debt of public administration in a methodology applied by all EU countries. Furthermore, it includes the cash execution of revenues and expenditures of the state budget and their comparison with the approved budget for the respective year. The Ministry of Finance of the Slovak Republic publishes the State Final Account of the Slovak Republic within 10 days after its approval by the National Council of the Slovak Republic.