It is final: The budget deficit may not exceed 2% of GDP

The budget deficit, on a cash basis, cannot exceed 2% of the country's gross domestic product (GDP), while redistribution of public spending cannot exceed 40% of GDP, lawmakers finally passed at second reading of the Public Finance Act. The bill was passed by the Government in October 2012 and its first reading was in November last year when the main clauses in it were widely discussed.

The Act also provides for the structural deficit of the Public Administration sector not to exceed 0.5% of GDP on an annual basis. The deficit in the sector, calculated based on the methodology of the European System of national and regional accounts in the Community, may not exceed 3% of GDP.

The bill is aimed at putting the management of public finances on a broad base, while the medium-term budgetary framework should become a real tool for medium-term forecasting and planning.

According to the new rules, municipalities' debt may not exceed 15% of their average annual revenue, including their own equalisation subsidy for the past three years, calculated based on data from the annual financial statements. So far, the limit was 25%, but the benchmark was the previous reporting year alone.

The Act also imposes restrictions on the deficit of the consolidated fiscal programme - up to 2%, and costs - up to 40% of GDP, while the deficit of the Public Administration sector will be limited to 3%. The Act will enter into force as of 2014.

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