Parliamentary battle over budget rebalancing, the government talks about development, the opposition about new debts and a budget hole

The recent budget rebalancing proposal has sparked intense debate within Macedonia's parliamentary assembly, highlighting both optimism about economic progress and concerns over fiscal sustainability. The discussion centered around the government’s claim that the budget is developmental, emphasizing continued investment in capital projects as part of national development. Malisa Stankovski, a member of the VMRO-DPMNE parliamentary faction, presented his views during a commission session, asserting that the budget rebalancing process reflects a realistic assessment of current financial conditions, including how much of the projected figures have been realized and necessary adjustments where needed.

Stanovski emphasized that the government had previously argued that the initial budget was developmental, with significant capital investments planned, economic growth projections set at 3.8%, and increased allocations for pensions, salaries, company support, and debt repayment from previous periods. In contrast, the opposition had claimed the budget was underdeveloped, predicting that economic growth would not materialize, capital investments would not be fulfilled, and further rebalancing would lead to reductions in capital spending while increasing transfers.

According to Stanovski, revenue growth in the first six months reached 5.7%, driven primarily by income tax increases of 6.3%, contributions of 6.4%, and other non-tax revenues of 12.4%. He noted that despite this growth, there was a decrease in excise duties due to measures taken to prevent a financial shock on citizens amid a global economic and energy crisis. These measures included reducing excise taxes on petroleum products by four denars, resulting in a 6.5% reduction in excise revenue collection.

In the same period, industrial activity showed a rise of 0.8%, with a notable increase of 7.4% in the most recent month. Construction saw a 7.2% increase, services rose by 3.6%, and agriculture recorded a 2.9% increase. Stanovski highlighted that pension payments were not only maintained but also increased by 1,000 denari per recipient, following requests from pensioners and citizens. Additionally, the government repaid a 700 million euro loan inherited from the previous administration and addressed a 50 million euro debt related to a solidarity tax. Collective agreements with remaining parts of the administration resolved long-standing issues regarding salary increases, contrary to the opposition's claims that wages would not rise.

Capital investments in the first half of the year saw a realization rate increase of 53% compared to the same period last year. On the revenue side, the budget is projected to grow by 4.5 billion denari, bringing total revenue from 374.9 billion to 379.5 billion denari. This increase is attributed to higher income tax collections, contributions, and other non-tax revenues, which have collectively contributed significantly to the overall budget growth.

The debate surrounding the budget rebalancing extended beyond numerical figures, reflecting broader political and economic considerations. Saša Lukačevska, chair of the Commission and a representative of the SDSM party, criticized the proposed changes for failing to address critical challenges faced by citizens, particularly concerning living standards and inflation. She argued that the budget does not offer concrete solutions to these issues and instead shifts problems into the future through new debts. Lukačevska pointed out that the document lacks specific measures to reduce inflation and highlighted concerns about the state of the pension system. She emphasized that discussions about deficits and classifications should be accompanied by clear explanations of their impact on household budgets, advocating for transparency rather than vague justifications for budgetary gaps labeled as development.

On the other hand, Bojan Stojanovski, a VMRO-DPMNE MP, defended the rebalancing as a reinforcement of the existing economic direction rather than a fundamental shift. He stated that the document illustrates how the country adapts to real economic movements and focuses on implementing projects with developmental effects. Stojanovski highlighted that capital expenditures would increase by 5.8 billion denari, with development sub-programs growing by over 4.2 billion denari. He listed infrastructure projects such as roads, railways, municipalities, water supply systems, sewage treatment plants, healthcare facilities, schools, student dormitories, sports facilities, and environmental improvements as areas benefiting from these investments.

Stojanovski underscored that economic indicators show improved revenue performance and better implementation of capital expenditures. He argued that these figures reflect an active economy rather than stagnation, noting that capital expenditures in the first five months of the year increased by 44.8% compared to the same period last year. Earlier in the day, Finance Minister Gordana Dimitrievska-Kochoska explained that the budget rebalancing for 2026 did not arise from a lack of revenue or liquidity issues but from the need to align budget projections with new economic conditions. She mentioned additional funds allocated for legal obligations, regular salary payments in sectors experiencing growth, extra support for agriculture, social protection, municipalities, and accelerating the investment cycle.

The proposed budget revision sets total revenues at 379.5 billion denari, with income tax revenues nearly matching the initial plan at 213.2 billion denari. Non-tax revenues have seen a significant improvement, increasing by almost two billion denari, while donations have also experienced a rise. The ongoing discussions highlight the complexity of balancing economic development with fiscal responsibility, ensuring that public resources are used effectively to meet both immediate needs and long-term goals. As the debate continues, stakeholders will likely focus on monitoring the implementation of the rebalanced budget to assess its impact on economic stability, public welfare, and sustainable development.