The Ministry of Finance has prepared and submitted for consideration at the Cabinet meeting the annual informative report on the Fiscal Risk Declaration. In the context of the declaration, fiscal risk refers to the probability that the basic fiscal indicators will deviate from their projected values during budget execution.

To achieve the objective of fiscal risk management, the Ministry of Finance, in collaboration with state institutions, assesses the fiscal impact and probability of occurrence of identified risks, and necessary measures to mitigate or prevent these risks are developed or refined. To stabilize the impact of risks, a fiscal safety reserve is provided, the amount of which depends on the impact of the risks on fiscal indicators and must not be less than 0.1% of the Gross Domestic Product (GDP) annually.

The annually analyzed quantifiable and non-quantifiable fiscal risks include state and municipal guarantees, state loans, risks in the welfare sector and financial sector, contributions to the European Union (EU) budget, EU fund program expenditures, state commitments to make capital contributions on demand, fiscal risks of the economic activities of state-owned enterprises classified in the general government sector, court rulings, and many others. Most risks exhibit a symmetry characteristic, meaning that the probability and amplitude of positive and negative deviations are similar, and the impact of such risks in the long term is close to zero. Accordingly, such risks do not pose a threat to the stability of fiscal indicators in the medium term. The calculation of the reserve includes fiscal risks arising from state loans and state guarantees.

It should be noted that comprehensive and significant macroeconomic shocks and extraordinary situations are not directly analyzed in the declaration but are assessed separately in aspects that could potentially have a significant impact on public finances and their stability. These aspects include the analysis of state-owned enterprises not classified in the general government sector, the evaluation of guarantees, debt, and its sustainability in the general government sector, but in these cases, no reserve calculation is made.

The scope of the declaration expands over time, taking into account the relevance of issues. This year, the section on the impact of climate change has been expanded in the declaration, including a new subsection titled “Green Budget.”

The preparation of the declaration and determination of the amount of the fiscal risk reserve is an integral part of the preparation of the state budget bill for the current year and the medium-term budget framework, as the available fiscal space for financing priority measures is determined, taking into account the amount of the fiscal safety reserve calculated within the framework of the declaration. When reviewing the declaration, the Cabinet of Ministers will decide on the amount of the fiscal safety reserve. This year, it is proposed that the fiscal safety reserve for 2025–2027 be set at the minimum level specified in the Fiscal Discipline Law, namely 0.1% of GDP (an average of approximately €47 million), thereby providing a “safety cushion” for cases where macroeconomic and fiscal indicators deviate from their planned values.

The informative report is available on the Legal Acts Drafts Portal.