While the approved budget for 2023 keeps primary spending unchanged in real terms, more effort is needed to address financing constraints in the context of an expected decline in revenues.

The main areas of focus are as follows:

Tax revenues. After a period of cyclically high revenues, the achievements of the anti-evasion plan should be preserved and an increase in the consumption tax rate should be considered.

Public remuneration. Despite some efforts to contain wage spending in the 2023 budget, remuneration spending is still projected to exceed 11 percent of GDP.

Therefore, the repeal of special wage indexation mechanisms and a civil service reform that strengthens the link between qualifications and remuneration should be considered, as well as the resizing of public employment.

Energy subsidies. Although positive steps have been taken to end the freeze on gasoline and diesel prices in 2022 (at a cost of 1¾ percent of GLP), consideration should be given to eliminating the universal GLP subsidy (Stabilization Fund) and improving the card-based targeting of the GLP subsidy (Solidarity Card).

To strengthen controls and limit losses, the capacity of the newly created subsidies unit in the Ministry of Finance should be developed.

Translated by: A.M