UTAO considers the government’s procedure for the deficit’s calculations are “incoherent”

  • ECO News
  • 29 October 2018

A few hours before the Minister of Finance went to the Parliament to present the budget, the Parliament's technicians have replied to Centeno's accusations, maintaining their 0.5% deficit target note.

The Budget Support Unit (UTAO) considers the procedures used by the government for the calculation of the deficit target in 2019, are “technically incoherent”, and they could not find, in the accounts, any reason for the values given by the government, questioning the role of the parliamentarians in this matter.

The answer from the Parliament’s technicians comes right before the minister of Finance, Mário Centeno, is getting ready to present this administration’s final budget to the national assembly.

“With all due respect, UTAO considers that the procedure used is technically incoherent, as we found no match in the internationally accepted accounting standards. The government has all the legitimacy in terms of budgetary execution, to spend less than it expected or to charge less than it expected, but it can’t change directly something which is an accounting standard”, UTAO wrote in their final report on the State Budget 2019.

OE2019 predicts a deficit of 0.2% of the GDP, but the Budget lines being discussed at the Parliament actually reach a 0.5% of GDP deficit, which amounts to a €590m difference. Last week, the minister of Finance defended his commission by stating that in previous years this was already a procedure used by the government regarding the deficit, but UTAO refuses this argument. “It is quite simple, for UTAO: the budget is not something one can predict, it is simply a matter of arithmetics, of merely subtracting the spendings from the revenue”, UTAO’s technicians noted.

The reasons behind UTAO’s note to the government

During last week’s debate, the value UTAO discussed (of a 0.3% difference, or €590m) was dismissed by the Socialist Party and the Government. On their note, UTAO shows the reasons that motivated their analysis were not only connected with the significant gap between these values but rather with matters of principle, and transparency, as they consider the government should be clear about the destination of this €590m divergence – and if these values are not necessary, then they should not be part of the official budget proposal, and they shouldn’t be deliberated at the parliament.

They claimed it is a “matter of principle”, as the issue that is posed now is whether it should be accepted from here on that the overall balance calculations become a mere forecasting exercise, and the concern in such a case is that the divergence becomes even bigger in the coming years when planning the budget — the technicians fear that ‘educated guesses’ will make the predictions for expenditure and revenue completely useless in the future.