In Cyprus, economists Charalambous and Pissarides propose a strategic shift in the government budget framework. Their reforms aim to enhance accountability, improve resource allocation, and align with EU fiscal targets for economic and social balance, setting the stage for long-term planning and sustainable growth.
What budgetary reforms are proposed to improve Cyprus’s government fiscal framework?
- Shift to a strategic budgeting approach with a three-year outlook and detailed expenditure targets per ministry.
- Implement performance-based budgeting with a focus on ready-to-action investment projects.
- Create specialized budgets for social and environmental goals, with explicit targets and support mechanisms.
- Simplify and decentralize the budgetary framework to enhance outcome evaluation and ministry accountability.
- Strategically utilize state assets and quantify the benefits of development incentives for revenue strengthening.
- Align with the revised EU Stability and Growth Pact, ensuring fiscal deficit targets support economic and social balance.
Public Finance Performance
Cyprus stands out for its commendable track record in public finances, consistently receiving positive reviews from global organizations and credit rating agencies. A hallmark of this success is the frequent budget surpluses that have contributed to a steady decline in public debt, bolstering long-term economic stability. However, in the eyes of economists Andreas Charalambous and Omiros Pissarides, the system is ripe for overhaul, particularly concerning the quality of public expenditure.
Toward a Strategic Budgeting Approach
The economists advocate for a more strategic budget with a reinforced three-year outlook. Instead of the current practice of setting general spending caps, they propose binding, detailed expenditure targets for each ministry. By doing so, the aim is to enhance the strategic character of the budgeting process and improve government accountability to both parliament and citizens. This approach could pave the way for longer-term planning and more effective resource allocation.
Implementing Performance-Based Budgeting
The shift towards performance-based budgeting is ambitious. It calls for a fundamental transformation of the existing system and will likely require a significant period to fully implement. Under this modernized framework, development budgets would only include investment projects that are ready for action, assessed holistically over their life span instead of in annual fragments. Such a reform intends to address the chronic under-execution of development budgets.
Specialized Budgets for Social and Environmental Goals
The creation of a comprehensive social budget is also on the table, targeting support for the most vulnerable groups in society. This would involve setting explicit goals related to employment, income support, and access to fundamental services like education, healthcare, and housing. A parallel budget dedicated to achieving climate neutrality could set binding targets and provisions for policies, public infrastructure investments, incentives for private investments, and social compensation mechanisms.
Simplification and Decentralization
By simplifying the budgetary framework and reducing the number of articles requiring parliamentary approval, the finance ministry’s role would shift from micromanaging expenditures to evaluating outcomes based on set targets. This decentralization of decision-making would empower individual ministries and organizations to take charge of their financial planning while holding them accountable for their results.
Asset Utilization and State Guarantees
Charalambous and Pissarides also point to the potential of special provisions to strengthen public revenues through the strategic utilization of state assets and state guarantees. Additionally, quantifying the cost-benefit of development incentives is crucial for ensuring that public funds are used efficiently to stimulate growth.
Addressing EU Stability and Growth Pact Requirements
These reforms could set Cyprus on a path to better meet the requirements of the revised EU Stability and Growth Pact. The Pact underscores the need to enhance control over expenditures to achieve fiscal deficit targets, advocating for a process that supports economic growth and social balance. The success of these reforms hinges on the political will, expert engagement, and an open dialogue with the citizenry. An empowered independent fiscal council will also play a crucial role in this transition.
Andreas Charalambous and Omiros Pissarides are economists who recognize that these steps are fundamental to the nation’s fiscal health and the prosperity of its people. They emphasize that these changes, while challenging, are essential for future-proofing Cyprus’s economy.
What budgetary reforms are proposed to improve Cyprus’s government fiscal framework?
- Shift to a strategic budgeting approach with a three-year outlook and detailed expenditure targets per ministry.
- Implement performance-based budgeting with a focus on ready-to-action investment projects.
- Create specialized budgets for social and environmental goals, with explicit targets and support mechanisms.
- Simplify and decentralize the budgetary framework to enhance outcome evaluation and ministry accountability.
- Strategically utilize state assets and quantify the benefits of development incentives for revenue strengthening.
- Align with the revised EU Stability and Growth Pact, ensuring fiscal deficit targets support economic and social balance.
What is the current state of public finances in Cyprus?
Cyprus has a commendable track record in public finances, receiving positive reviews from global organizations and credit rating agencies. The country has consistently achieved budget surpluses, leading to a decline in public debt and contributing to long-term economic stability.
How will a strategic budgeting approach benefit Cyprus’s government fiscal framework?
A strategic budgeting approach with a three-year outlook and detailed expenditure targets per ministry will enhance the strategic character of budgeting, improve government accountability, enable longer-term planning, and facilitate more effective resource allocation. This reform aims to align with EU fiscal targets for economic and social balance.
What role do economists Andreas Charalambous and Omiros Pissarides play in proposing government budgetary reforms for Cyprus?
Andreas Charalambous and Omiros Pissarides are economists who advocate for reforms to enhance accountability, improve resource allocation, and align with EU fiscal targets for economic and social balance in Cyprus’s government budgetary framework. Their proposed reforms aim to set the stage for long-term planning and sustainable growth in the country.
