Skopje, 2 November 2023 (MIA) — Essential for gradually introducing EU fiscal rules as of 2024 is for the country to make a medium-term fiscal plan and implement it as well as to automatically correct the budget deficit if public debt rises beyond a certain point, according to experts at Thursday's session of the National Convention on the European Union in the Republic of North Macedonia's Worgroup 6 on Anticorruption (Chapter 5: Public Procurement; Chapter 18: Statistics, Chapter 32: Financial Control).

The workgroup recommended a review of the clauses set in the fiscal rules for natural disasters, decline in economic activity, and strategic investment project costs so they would be aligned with the EU rules.

Another recommendation was to change the tax system and create fiscal rules that would better support the needs of public health care and pension funding in the next ten years, given the demographic aging and workforce emigration.

The experts also recommended using an Integrated Financial Management Information System that would promote better public financial management by provide information required for rules-based fiscal policy decision making.

Senior Advisor at Slovenia's Ministry of Finance Franci Kluzer addressed the main discussion topic — "Rules-Based Fiscal Policy: The Significance and Role of Public Finances in the European integration process of the Republic of North Macedonia" — by presenting the EU fiscal rules the bloc had accepted to mitigate EU member states' fiscal imbalance since the outbreak of the pandemic and the start of Russia's war in Ukraine.

Speaking on fiscal sustainability criteria and objectives, mandatory fiscal adjustment to a sustainable fiscal position, and sanctions in case of non-compliance, Kluzer said the criteria for fiscal sustainability were based on debt levels. Countries were to be classified by risk level, and four-year plans were to be used to adjust and meet goals by using net primary expenditure as a control variable. Sanctions in case of non-compliance were to include an excessive deficit procedure, he said.

Gligor Bishev, head of the Fiscal Council of the Republic of North Macedonia, said no matter what rules were adopted, economic policy makers wanted to make the business environment predictable so companies would develop their contingency plans when deciding to invest.

"We face a great deal of challenges," Bishev said, adding that it would take much more effort and change to get closer to the EU. "The key is how to make the expenditure side more efficient and to increase the growth rate so the citizens' standards converge in parallel while the fiscal rules are applied more intensely at the same time."

Economics expert Dragan Tevdovski said rules-based fiscal policy should be implemented in institutions. "This is a convention om Europe. We should not wait to enter into the EU, but try to apply the EU system's elements ourselves."

According to him, the country should choose a fiscal path that would create a sustainable level of public debt in the medium term and make sure that investments in the medium term are appropriate.

National Coordinator of NCEU-MK and European Movement president Mileva Gjurovska said other workgroups were discussing Chapter 11: Agriculture and Rural Development; Chapter 23: Judiciary and Fundamental Rights; Chapter 24: Justice, Freedom and Security; and Chapter 27: Environment and Climate Change.

"The dialogue in the National Convention is based exclusively on expert arguments, ensuring mutual respect between workgroup members despite their potential differences in ideological and political orientations," Gjurovska said.

Commenting on the Workgroup 6 on Anticorruption, she said the public needed to know about its work and about the flow of public money.

North Macedonia has a 2018 fiscal rule for municipal budgets, and the new Organic Budget Law in 2022 introduced a fiscal rule for the level of public debt, limiting it to no more than 60 percent of GDP. However, public debt is already close to the fiscal rule limit (57.99 percent of GDP in Q2 2023) and the national Public Debt Management Strategy 2024-2026 predicts that as early as 2024 and 2025 public debt will be higher than the fiscal rule limit, i.e., 63.2 percent of GDP in 2024 and 61.0 percent of GDP in 2025. mr/