Review of the National Budget Group on the state budget of the year of 2014

Review
of the National Budget Group
on the state budget of the year of 2014

Authors: Gubad Ibadoglu
Rovshan Agayev

This review was prepared with the support of the Delegation of the European Union and OXFAM, UK office in Azerbaijan. The National Budget Group is solely responsible for the content of publication and does not reflect the position of any donor organizations.

Baku 2014

According to the bill of the Azerbaijan Republic on “The State Budget of Azerbaijan Republic for the year of 2014” the revenues of the state budget are envisaged in amount of AZN 18384,0 mln. and the expenditures of the state budget are envisaged in amount of AZN 20063,0 mln. The budget revenues forecasted for the year of 2014 was higher in comparison with the year of 2012 for 6,4% or AZN 1102,4 mln. and lower in comparison with the forecast for the year of 2012 for 4,0% or AZN 775,0 mln. The expenditure of the budget forecasted for the next year exceed implementation of the year of 2012 for 15,6% or AZN 2716 mln and the forecast of the year of 2013 for 1,1% or AZN 213,0 mln.
The share of the revenues of state budget in the year of 2014 in the GDP was envisaged in the level of 31,4% which is lower in comparison of implementation of the year of 2012 for 0,6% and in comparison of forecast for the year of 2013 for 3,6%. The level of the budget expenditures in GDP in the year of 2014 is forecasted in the level of 34.1% which is higher than the factual indicator of the share of the budget expenditures of the year of 2012 in GDP for 2.0% and lower than the forecast indicator of the year of 2013 for 1,3%.
The shortage of the state budget in the year of 2014 is forecasted in amount of AZN 1679,0 mln. which weight in GDP is expected as 1,5%.

1) Budget revenues
Analysing the state budget revenues for the year of 2014 one of the principal features attracting the attention is assessment of the changes happening on the budget-tax policy in the year of 2014 for implementation of the financial policy in compliance with the average economic and social development forecast of the country. The main income targets of the Government in the budget policy for the next year are: (1): increase of the share of the non-oil revenues in the non-oil Gross Domestic Product (GDP) and budget revenues; (2) coordination of the deduction basis of the income tax deducted from individuals and mandatory state insurance fees; (3) increase of the collection coefficients of the tax proceeds; (4) strengthening the measurements directed to liquidation of the taxt debts and prevention of tax avoidance; (5) continuing the works directed to balancing the local revenues and expenditures upon the cities and regions of the Republic.
The researches were implemented by the experts of the National Budget Groups basing upon the comparative analysis of the income forecasts of the state budget in the year of 2014 with the indicators of the previous years and they allow assessing the following inclinations connected to the principal targets of the budget policy for the next year:
1.1. Although stable increase dynamics of the share of non-oil revenues in the GDP was observed, generally the share of the state budget in GDP is inclined below.

In order to increase the share of the budget proceeds acting as the principle target of the budget-tax policy of the government, principally the non-oil revenues in GDP the speed of increase of the non-oil revenues of the state budget of the year of 2014. Subsequently, the forecasting indicators directed to increase of the share of the non-oil revenues in the oil and non-oil GDP stipulate certain changes in the budget-tax policy. Thus, the share of the non-oil revenues of the state budget in the GDP for the year of 2014 is envisaged as 10,7% and in the level of 17,3% in relation to non-oil GDP which is higher than the implemented indicators of the year of 2012 consequently for 2,1% and 1,1% and exceeds the forecasting indicators of the year of 2013 consequently for 1,3% and 1,1%.
The state budget revenues for the year of 2014 are envisaged to be provided upon the line of the Ministry of Taxes for 38,6% and the State Customs Committee for 8,2% and, State Oil Fund for 50,8% and other resources for 2,4%. In content of the state budget revenues forecasted for the next year, 25,7% of the revenues expected to be inserted into the state budget upon the line of the Ministry of Taxes shall be provided in the expense of the State Oil Company and, 13,8% of them shall be provided in the expense of the contractors’ payments upon the profit tax in compliance with the share allocation agreements of oil and gas production.
Subsequently, the share of the budget revenues in the year of 2014 in the GDP shall be changed in comparison with the previous two years as specified in the following chart (see: figure 1).

Figure 1. Share of revenues in GDP, in % for the years of 2012-2014
According to the implemented calculations, the total revenues per head from the state budget forecasted in the year of 2014 is AZN 1975 or USD 2515 and the non-oil revenues are AZN 625 or USD 800. It’s noticeable for comparison that in the post-socialist countries not having resource revenues the consequent indicator connected to total revenues is USD 10597 in Slovenia, USD 7474 in Hungary, USD 6018 in Slovakia, USD 5679 in Croatia and USD 4900 in Czech Republic. This indicator in postsoviet republics is AZN 2900 in Russia and USD 2100 in Kazakhistan.
The revenues of the state budget from non-oil sector for 2014 are forecasted in amount of AZN 6245000,0 thousand which exceed the indicator of the year of 2012 for 35,1% or AZN 1621,5 mln. and for 20,8% or AZN 1076,0 mln. than the indicator of the year of 2013. According to the calculations the share of the revenues to the state budget from non-oil sector in the year of 2014 shall be 31,6 % and revenues from the oil sector shall be 68,4%. It’s noticeable for comparison that while forecasting the state budget for the year of 2013 the appropriate indicator was equal to 73,09%. The main reason for this decrease is reduction of the profit tax of the contractors upon the share allocation agreements of production in non-oil sector as well as the transfers having significant share in the content of the budget revenues. Furthermore, it’s noticeable that the forecast on the taxes and other payments (excluding the individuals’ income tax) concolidated in the line of SOCAR to the state budget of the year of increased in comparison with the previous year for 22,5% or AZN 335,0 mln and reached AZN 1825,0 mln. This indicator exceeds that of the year of 2012 for 36,5% or AZN 487,9 mln. The profit tax of the contractors upon the share allocation agreements of production in oil and gas sector was forecasted in amount of AZN 977,0 mln which is lower than the indicator of the year of 2012 for 30,03% or AZN 424,4 mln and for 15,0% or AZN 173000,0 than the indicator of the year of 2013.
As result it’s noticeable that in comparison with the previous years reduction of investment expenditures in the next year as well as increase of the revenues from non-oil sector in environment of application of long-term tax remissions for revenues on investment securities, agricultural manfacturers and industrial parks are not deemed as believable. Forecasting the increase of the non-oil revenues of the budget of the year of 2014 basing upon the increasing microsimulation and calculated general balance models of the taxation basis with connection to factors of inflation and economic increase is a risky attitude. In this case risk management is possible only by means of classification of the currently established tax debts and repayment of its significant part as well as payers’ involvement to tax payments in addition to their own obligations upon application of the methods of administrative influence.
Thus, in comparison with the forecasting budget of the current year reduction is expected in two and increase is expected in one of three resources providing revenues from oil and gas sector to the state budget of the next year. NBG positively evaluates the reduction of revenues from the State Oil Fund in comparison with the forecast of the year of 2013 and hopes in lowering inclination. Simultaneously, NBG recommends to establish a contact between the forecasted transfer amount and increasing dynamics of non-oil GDP and simultaneously, reducing tendency of the oil revenues.

1.2. Coordination of income tax deducted from individuals and the deduction bases upon mandatory insurance fees would increase revenues from these resources.
The used statistic indicators are connected to the income acquired in connection with piece work during calculation of the forecasts of individuals’ income tax, income acquired from activity not connected to piece work and statistic indicators connected to the payers’ number. Salary and equal payments as well as non-oil GDP are used for calculation of individuals’ taxes. According to the “Methodology of forecasting and modelling of the state revenues” approved upon the Financial Minister’s Decree No. Q-05 dd. May 10, 2012, the individuals’ income tax is forecasted upon the tax flexibility method considering the revenues from piece works, income acquired from activity not connected to piece work and the payers’ number. Increase in amount of AZN 99, 0 mln or 112,6 forecasted in the individual’s income tax in the year of 2014 will be provided in the expense of increase of salary of those working in the budget sector starting from September of 2013. Because according to the valid methodology 1% increase of the salary fund stipulates about 4% increase of the individual’s income tax. The state budget of the year of 2014 forecasts AZN 211,8 mln or 7,5% more than the previous year.
Allocations upon mandatory social insurance fees to the social protection fund are modelled as a function of salaries. Considering the fact that these two payments belong to the same basis (salary payment fund), starting from the year of 2014 there will be implemented the policy of coordination of the income tax deducted from individuals and the deduction bases upon the mandatory state insurance fees. In opinion of NBG, formation of such correlation may promote to clarify the information regarding the existing and potential tax bases in this sector as well as determine the level of double-entry book-keeping.

1.3. Increase of the tax revenues with administrative method will cause more inflation.
The main sources of income of the state budget of Azerbaijan Republic are oil, non-oil and import funds. Budget revenues from the oil sector are mainly provided through SOCAR and IOC. Revenues from non-oil sector are implemented mainly by private companies and large-scale governmental enterprises. As in the current year, increase of collection coefficients of tax revenues in the future year by the governmental fiscal authorities in environment of application of the tax rates is calculated basing upon increase of the price of crude oil in the world market and simultanously the inflation. According to the presently applied methodology, forecast of the state budget revenues USD 100 is taken as basis for 1 barrel of crude oil. Upon the existing methodology, the revenues from sale of oil depend on the volume of exported oil (1), average annual export price of 1 barrel of oil (2) and average annual rate of 1 USD in relation to AZN. Analysis of these indicators shows that according to the macroeconomic forecasts the volume of the oil exported in the year of 2014 will reduce. In this case, increase of the revenues acquired from sale of oil may happen in the expense of increasing change of the indicators 2 and 3. Simultaneously, considering that the main part of the state budget revenues from il sector (transfers of SOFAZ) is stable, the change in the payments of SOCAR and IOC will depend on the average annual rate of USD 1 and simultaneously, the oil price in the world market. Upon commencement in the relations between USA and Iran, considering increase of the daily quote of Iranian oil to be exported to the world market from 0,75 mln barrel to 2 mln barrels, reducing inclination of the oil to the world market because of political (gradual removal of the sanctions against Iran) and economic (increase of proposals) is mostly assumed. In this case the average annual exporting price of 1 barrel of the Azeri-light oil is expected to reduce. Although this tendency has no impact on the transfers of SOFAZ it may cause reducing changes in the payments of IOC and SOCAR. It’s necessary to remember that decrease of revenues from oil export reducingly impact also to the level of payments upon other taxes (profit, income, VAT, simplified tax, etc.). In this case, increase of the tax collection coefficient acting as the government’s task is possible mostly in the expense of the changes occurring in the non-oil sector. The main factor assumed to impact on the changes in this sector may be activation of the factors increasing inflation in the economy subsequently to rising the regulated rates. In the meeting of the Tariff (price) Council dd. December 2, 2013 the application of the State Oil Company of Azerbaijan Republic regarding the rate of sale of some oil products as well as natural gas to the enterprises manufacturing power supply and steel-melting factories basing upon chemical, aluminum and ore materails was reviewed and appropriate regulation of the rate was implemented. Thus, the retail sale price of the AI-95 petrol was assigned as AZN 0.80 per liter and AZN 0.70 per liter of AI-92 and AI-80 and, AZN 0.60 per liter of diesel fuel. New wholesale prices of some oil products were approved. Besides, upon the Council’s decision the rate of sale of natural gas to the enterprises manufacturing power supply and steel-melting factories basing upon chemical, aluminum and ore materails was assigned in the level of AZN 80 per each 1000 cubic meters. This change stipulates increase of the funds forecasted from excise tax applied to manufacture of products in Azerbaijan Republic up to 154,9% in the year of 2014 in comparison with the year of 2013 and rising the sale price of other products subsequently to the mutual impact of markets. Increase of the sale prise of products and services, in its turn, would provide increase of simplified tax subsequently to direct increase of consumption taxes (VAT) and indirectly, increase of currency. Another factor increasing the inflation may be increase of consumers’ expenditures for the reason of materialization in products and services of expenditures because of increase of the entrepreneurs’ official and non-official payments.
Structural and trend analysis of the budget-tax policy of the year of 2014 and the budget itself specifies height of the level of realization of the last two assumptions among the aforesaid ones.

1.4. Liquidation of the tax debts and strengthening the administrative measurements in direction of preventing from avoidance of taxation will increase tax discipline and non-official payments.
According to the reporting information of the half year of 2013 of the Ministry of Taxes, the total amount of the taxpayers’ debts to the state budget upon tax and mandatory payments was AZN 2405,4 mln. 57% of the debts to the state budget to that date was in share of the taxpayers in the state property. The debts of the taxpayers in the state property occurred mainly because of low level of tax discipline of large taxpayers. Namely due to this reason, the measurements directed to liquidation of the tax debts in last years and prevention of avoiding taxation fail to become seriously efficient. For instance, within the last six years “Azerdemiryol” reduced budget payments from AZN 25 mln to 2 mln or 12.5 times. In comparison only with the year of 2011, the budget payments of this enterprise within the year of 2012 was lower for about 5 times. Besides, the tendency of reduction of payments of two large taxpayers Bunula yanaşı altı iri vergi ödəyicisinin (the Ministry of Communication & Information Technologies, “Azerenergy” OJSC, “Azerbaijan Railways” CJSC, Caspian Marine Navigation Board, “Azerbaijan Airlines” CJSC, “Azersu” OJSC) to the state budget still continues.
In opinion of NBG, the main reason for the deplorable state in the tax payments of large taxpayers is connected to failure of implementation of the restructurization reforms in these organizations and undue management as well as avoidance of inspection and assessment of some of these institutions by the Ministry of Taxes and Chamber of Accounting. This fact stipulates occurence of potential tax debts.

1.5. The works directed to balancing the local revenues and expenditures upon the cities and regions of the Republic shall be continued.
The forecast upon the local revenues of the regions is envisaged for the year of 2014 in amount of AZN 557,2 mln. which exceeds the indicator of the year of 2012 for AZN 14,9 mln or 36,7 %, and the indicator of the year of 2013 for AZN 7,2 mln or 15,0%. Increase of the local revenues in relation to the indicators of the years of 2011 and 2012 (excluding some occupied regions işğal) as well as the forecast for the year of 2013 is envisaged for all cities and regions. This increase may be explained by belonging of the calculated taxes of taxpayers in the tax accounting in centralized order to the local revenues of the appropriate cities and regions according to the territorial belonging of their activity. Thus, in connection with formation of the local revenues of the regions, starting from the year of 2014 all types of calculated taxes of the taxpayers acting in the territories of cities and regions and registered in centralized order will belong to the content of the local revenues of these regions and countries. Although the changes in this direction started since the year of 2012, that time this rule applied to individuals’ income tax, property tax and land tax and since the year of 2013, all types of taxes of legal entities excluding profit tax. Starting from the next year the exclusion for legal entities’ profit tax will be removed.
NBG considers that rating of the calculated taxes of the taxpayers included to the tax register in centralized order according to their territorial belonging may me deemed as significant from point of view of discovering the financial potentials of the regions. Analyses implemented in this direction show that there is necessity for development of rules regulation proportional geographical allocation of the calculated taxes of the same taxpayers acting in the territory of several regions and included to the tax register and hereby, fiscal balancing policy should be implemented in the local level.

2) Budget expenditures
In the year of 2014 investment funds will have preferential share in the total amount of the state budget expenditures. Thus, 31% of the forecasted budget expenditures of the next year are the expenditures of capital investment. In its turn, forecast for the expenditures not belonging to the main sectors in general concusion is 13.3%, social protection and social provision expenditures are 10.3%, expenditures on general state services are 9.9%, educational expenditures are 8.2%, defence expenditures are 8.2%, judicial power, law machinery and prosecution expenditures are 6.2%, health expenditures are 3.6%, agricultural expenditures are 2.8%, cultural expenditures are 1.55% and economic activity expenditures are 1.6%.
As the main targets connected to the principal expenditures the Government notes the following factors in its document connected to the main directions of the budget policy in the years of 2014-2017: (1) maintenance of the optimal level of the weight of state budget expenditures in GDP; 2)protection of the investment and social concentration of expenditures; continuation of the work of development of the budget expenditures basing upon target programs based on the last results; (3) perfection of the mechanism of usage of the financial supports and transfers allocated from the state budget; (4) support of development of entrepreneurship; 5) continuation of transfer to the financial mechanism per head.
According to the NBG’s assessments, 2 important lines are clearly visible in the government’s expenditures policy for the year of 2014. First, differing from revenues the government tried to protect the level of increase of the budget expenditures even in the expense of severe increase of the budget lack. Second, the government preferred to increase sosial load by means of reducing the shares of investments in the budget.
Generally, the comparative analysis of the expenditures forecasts of the state budget of the year of 2014 with the indicators of the previous year allow to evaluate some tendencies:
2.1. Steps were made in direction of increasing the budget transparency. Thus, firstly the government provided to the Parliament information regarding the structure of protection and law machinery expenditures deemed as “closed” hitherto. Heretofore, the government hadn’t included into the budget envelop the economic classification of the expenditures fully upon the “Protection” functional sector and upon the subsidiary sections of “Law machinery” and “Prosecutors’ Offices” of the functional sector of “Judicial power, law machinery and prosecution”. This step should be assessed as a positive step from point of view of increasing the control opportunities over implementation of the Parliament budget. Furthermore, in order to increase public awareness in the budget sector the publication of “Public Budget Guideline upon the summary and state budgets for the year of 2014” was developed and settled in the website of the Ministry of Finance. However, there is technical restriction for printing this e-publication. Reading of this guideline is possible only in e-format and its distribution among people not having access to Internet is impossible .
2.2. The amount of budget investments and their share in the general expenditures reduces. Allocation of AZN 6281.9 mln for capital investments is envisaged in the year of 2014 which is lower than the year of 2013 for AZN 652.3 or 9.4%. Subsequently to this reduction the share of the investment funds in the total budget expenditures is forecasted in the level of 31,3% which is the lowest level in the last 5 years. The analogical indicator of the year of 2013 was 34.9%. According to official explanation, the main reason for reduction of the investment expenditures of the budget is completion of the first stage of formation of the infrastructure in the country and continuing reduction of the investment loan of the budget. However, according to the government’s forecasts connected to reduction of the budget expenditures in the further four years the reduction of the investment expenditures is a mandatory step. Thus, according to the government’s forecasts connected to the summary budget for the years of 2014-2017, due to expected reduction of the oil revenues already in the years of 2015-2017 the state budget expenditures also will reduce for AZN 2263 mln or 12% and be equal to AZN 17 800 mln. As the present level of the education, health, defence, law machinery and management expenditures prevents from large-scale for reduction of the staff in this direction, reduction of the investment expenditures have no alternative for the government.
2.3. The share of the expenditures connected to repayment of the state debts in the budget remains high. Funds in amount of AZN 780.5 mln or equal to 3.8% of the total expenditures are envisaged to be allocated in the year of 2014. AZN 697.2 mln or 89.3% of these funds will be directed to repayment of the foreign debts. The share of the expenditures on financing of the governmental debts in the total budget expenditures in 2013 is forecasted in the level of 3.9%.
2.4. The share of the social expenditures in the budget increase. According to the government’s forecasts, the share of the social expenditures in the budget expenditures of the next year will increase in comparison with the previous year to 23.65% from 21.4%, including share of the educational expenditures from 7.7% to 8.2%, share of the health expenditures from 3.3% to 3.6%, share of the social protection expenditures from 9% to 10.3%. However, the developed countries direct in average 45-50% of their budgets to the social targets which is quite low indicator even in comparison with some countries of transition.
2.5. Utility and communication services provided by the budget organizations as well as fuel expenditures severely increased. In comparison with the previous year the utility and communication expenditures of the state budget is forecasted in the level of AZN 23.4 mln or 78.7% and the expenditures for purchase of fuel and lubricants are assumed to increase for 35.7%. However, there is not any grounded explanation of the reasons for so severe increase in the document connected to the budget project.
2.6. Funds in high amount are allocated in the expense part of the budget in direction of the non-classified expenditures without expression in the budget classification. Funds in average amount of AZN 850.0 were forecasted to be allocated in direction of expenditures upon various functional sections of the budget expenditures like “Financing of the measurements directed to perfection of the salary and pension systems”, “Application of the new rates for utility and communication services” and “Strengthening of the logistic provision”. For instance, AZN 161,0 mln were allocated for “Financing of the measurements directed to perfection of the salary and pension systems” upon the functional section of “Education” and AZN 153,1 mln were allocated within the frames of “Application of the new rates for utility and communication services” upon the functional section of “Social protection and social provision”. Decision No. 149 of the Cabinet of Ministers regarding unique budget classification dd. October 6, 2004 the budget expenditures are precisely classified upon sections, subsections, chapters, clauses and subclauses. However, although the classification does not include the cost directions of “Financing of the measurements directed to perfection of the salary and pension systems”, “Application of the new rates for utility and communication services” and “Strengthening of the logistic provision”, large amount of funds is allocated in these directions in separate functional sections. The problem is that neither the government’s document regarding explanation of the budget nor the Accounting Chamber’s conclusion regarding the bill clarifies the destination of the expenditures upon the new classification. From other hand, the expenses out of classification restrict the opportunities for the parliament’s and social control over the budget.
2.7. The expenditures of the goods and services (works) provided by the budget organizations increase with higher speed in comparison with the expenditures connected to salaries, pensions and hardship allowances. According to the analysis of the structure of the budget of the year of 2014 upon economic classification, the expenditures of the goods and services (works) provided by the budget organizations increased in comparison with the previous year for AZN 597.6 mln or 23.4% and totally aggregate AZN 250 mln or increase for 6,2% upon salary, pension and hardship allowances.
2.8. The funds envisaged for increase of scientists’ salaries are very few. Particularly low amount was envisaged for scientists’ salary. Next year only AZN 4 mln of the increase in amount of AZN 17,7 mln upon scientific expenditures will be directed to increase of the salary expenditures. These funds allow increase of scientists’ salaries only for 7-8% at best.
2.9. Very few part of the increased educational expenditures is envisaged for being directed to development of concrete educational steps. The expenditures upon the functional section of education are forecasted for increase next year in amount of AZN 122.9 mln or 8%. However, very few part of these increased expenditures will be directed to development of concrete educational steps. For instance, a bit more than half of the envisaged increases i.e. AZN 70.6 mln is directed to secondary and high education, however, the expenditures connected to boarding and special schools, lycees and professional-technical schools are shortened for about AZN 12 mln. These increases are very few from the point of view of meeting the financial need of the educational system and bringing the teachers’ salaries to normal level. Only AZN 90,7 mln is envisaged for increasing the salaries in the educational system for the year of 2014. Hereby, the salary may be increased only for AZN 15-16 at best per each employee not considering the mandatory social insurance fees for the sector where about 320 thousand people are employed.
2.10. Excess funds are envisaged to be spent in connection with the off-budget expenditures of the budget organizations from the budget of the next year. Generally, AZN 400 mln of the budget expenditures of the year of 2014 will consist of the off-budget expenditures of the budget organizations. The off-budget expenditures of the law machinery organizations are forecasted in amount of AZN 198,1 mln. Off-budget expenditures of these organizations will aggregate about the third part of the expenditures of the central governmental authorities. Thus, AZN 102.4 mln of the funds in amount of AZN 344.4 mln forecasted for maintenance of the central governmental authorities will consist of the off-budget expenditures.
The exciting case is that there is not any normative and legal base for regulation of these expenditures and provision of their transparent accounting and, the directions of expenditure and classification of these funds are not expressed in the documents provided to the parliament for being discussed.
2.11. State budget support to the local self-management authorities is very few. Only AZN 5.2 mln or in average was allocated for municipalities in 2014 which is equal to AZN 3 thousand per each municipality. Considering weakness of the financial potential of the local self-management authorities and existence of many social and economic problems to be settled by these authorities in the local level, there is evident necessity for significant increase of the financial allocation for local budgets from the central government’s budget. In 2014 the government of Georgia the budget of which is lower than the Azerbaijani one for about five times will allocate transfers exceeding the Azerbaijani one for about 70 times.

3) Budget lack
3.1. Budget lack has severely increased
The highest level of budget lack equal to about AZN 1,7 bln is forecasted for the last years. It is equal to 2,9% of the GDP forecasted for the next year and exceeds the last year’s indicator for about 2,5 times. The main attractive factor hereby is that the half of the budget lack will be reimbursed in the expense of foreign indebtedness. However, in case of provision of competitive development of small and medium entrepreneurship these funds might by reimbursed in the expense of taxes and necessity of putting the heavy load of foreign indebtedness over the next generations would be avoided.
NBG’s recommendations connected to the budget expenditures for the year of 2014
In direction of increase of transparency and retionality of the budget expenditures:
• Inclusion of the detailed information about all projects financed in the expense of the state capital investments into the budget envelop from point of view of provisio of transparency and accountability;
• Inclusion of comprehensive information about the content and structure upon the cities and regions of the country into the state budget envelop submitted by the Government to the Parliament;
• Establishment of normative-legal base regarding expenditure and accounting of the off-budget expenditures and determination of legal limits connected to the amount of these expenditures;
• Rejection of experience of using the classification of the expenditures not specified in the normative and legal acts connected to the budget classification;
• Implementation of root changes in the budget legislation in order to provide passing to the result-basing budget and, forecasting the budget expenditures of the next and further three years upon each functional section basing upon the target programs and strategic plans of budget customers.
In direction of optimization of the budget expenditures:
• Determination of the target indicator of the social expenditures and particularly, the educational and health expenditures in average-term period and their share in the budget and, maintenance of this level while forecasting the budget expenditures;
• Preparation of medium-term and long-term strategy connected to development of science and inclusion of financing the science into the budget priorities in compliance with the program of reforms accepted within the frames of this strategy and, perfection of the salary system of scientists;
• Overall perfection of the mechanisms of allocation of financial aids for the local budgets and expansion of the amount of target transfers to the local budgets in connection with the local social and economic needs.
In direction of budget balancing:
• Removal of the severe differences between the increasing rates of the expenditures upon the functional sections of the budget. Provision of comprehensive explanations to the parliament regarding excess increase and reduction of the expenditures upon separate directions as well as existence of severe differences between the levelw of the local expenditures upon various cities and regions of the country.
In direction of optimization of the budget lack and the level of the foreign indebtedness:
• Determination of the target indicator upon relation of the medium-term budget lack to GDP and maintenance of this level while forecasting the budget expenditures;
• Prevention of excess increase of foreign indebtedness and assignment of restrictions for involvement of foreign loans by the state companies upon the state line as well as stipulation of rules for involvement of these debts.