Open Data Albania is analyzing the Structure of State Budget Expenditures for the 2005-2022 period.
The total expenditures of the State Budget are non-refundable payments, made by the government for the fulfillment of its functions (healthcare, defense, education, maintaining order, etc.).
The Structure of Expenditures consists of several categories, such as Capital Expenditures, which are investments and public works with long-term effects and sustainability, Current Expenditures, which are expenditures with short-term effects, spend on salaries, purchases of goods and services, and the like.
The Other category has beenapplied mostly in recent years by the Leftist Governing Majority. It is designed to include expenditures allocated to several programs that are also concerned with coping with not very common situations, such as natural disasters and emergencies, like the one created as a result of the economic situation in international markets after the War in Ukraine. The application of the Other category also carries a high risk for budget discipline, since these types of expenditures often stand out of the domain of the normal budget execution with well-regulated legislation and can only be implemented and executed by passing Temporary or Special Legislation. In this article, we are finally analyzing the Structure for Actual Expenditures, i.e. expenditures consolidated in the Budget.
During the planning phase, we also find reflected the Reserve Fund, which is a fund created to cope with out of ordinary situations occurring during the budget year. At the end of the year it is generally categorized into one of the other fiscal indicators.
The Reconstruction Fund is a special fund created to cope with the consequences of the 2019 Earthquake and for the purpose of implementing of the Government’s Reconstruction Program: this fund as well becomes part of the Capital Expenditure category during the reporting of the Actual Budget. As for Other expenditures, the Albanian government mainly used this category for lending to the energy sector, and recently also for budgetary support to it, Arrears were created as a separate category in the 2014 Budget, as a result of the government’s policy of paying off internal liabilities and planning in the long term to prevent their creation. These types of expenditure categories planned and implemented not in a very typical manner and lacking a consolidated budgetary discipline are characteristic of the current Government and the Majority of its Budgets (2013 – 2023).
- For 2022, the consolidated expenditures in the State Budget account for a total of ALL 651 billion and are divided into:
– current expenditures, that make up 76.8% of the total expenditures or about ALL 500 billion;
– capital expenditures that make up 17.2% of the total or ALL 112 billion (this includes the Reconstruction Fund worth ALL 28.9 billion, or 26% of the total capital expenditures)
Also, part of the expenditure structure for 2022 are some non-typical categories, which are not found in every other year budget’s, such as:
– the Expropriations Fund, which constitutes 1.7% of the total expenditures, expressed in the value of ALL 11 billion;
- net lending (for the energy sector) in the amount of 1.2% of the total expenditures, in the amount of ALL 7.9 billion;
- support for the energy sector in the amount of ALL 20 billion or 3.1% of the total expenditures.
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
Current expenditures have continued to grow year after year, taking up the larger part of the total expenditures. Likewise, this category of expenditures occupies about 80% of the total expenditures during the 2005-2022 period under review. The ratio of Current Expenditures to Total Expenditures reaches its minimum in 2008 and the maximum in 2016.
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
Capital Expenditures have fluctuated over the years. On average, they account for 18% of total expenditures for the 2005-2022 period (including the Reconstruction Fund in the 2020-2022 years). The years in which the Capital Expenditures occupy a greater portion are 2008 and 2009 (due to the construction of the National Road), followed by 2021 (Reconstruction plus Investments of the year). The years with the lowest portion of Capital Expenditures are 2014-2017 (years 2014 and 2015 due to the Outstanding Liabilities category).
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
In the State Budget we find some other non-typical categories, as mentioned above. The first year with a good portion of non-typical categories (over 3% of total expenses) is 2014. In 2014, it was the first governing year of the Socialist Party, after 8 years in opposition. The new government took the initiative to pay off the State’s Outstanding Liabilities (otherwise known as Hidden Debt – they are obligations that the government has not paid on time to companies that have performed public works/services). In this way, the Outstanding Liabilities item was created, with the aim of paying them off, and with a long-term plan to prevent such a thing in the future through legal stipulations and restrictions. Arrears made up 7.73% of the total expenditures in 2014, expressed in absolute terms about ALL 33.92 billion (out of 35 billion planned).
In 2014, ALL 1.5 billion were planned as a safety net for households regarding energy costs, ALL 1.5 billion concerned expropriations, and ALL 169 million were realized capital transfers (Expenses not included in the two main categories).
Even in 2015, Arrears remained as a separate category in the State Budget Expenditure Structure. This year, these type of expenditures were as much as 4% of the total expenditures , expressed in absolute value, ALL 17.6 billions. Another ALL 5 billion in expropriations and ALL 1 billion in energy net lending were also fulfilled.
In the 2020 State Budget, a special fund called the Reconstruction Fund was created, in order to cope with the consequences of the earthquake (the Reconstruction Fund was marked as a separate category in the 2020 State Budget law, while in subsequent budget laws it became part of Capital Expenditure category). In 2020, in addition to the Reconstruction Fund, which was worth ALL 16.6 billions, the legislators created another fund due to the global pandemic of Covid-19, as part of the Reserve Fund, creating the item “Contingency for the anti-Covid19 Social Package”. About ALL 12.05 billion went towards this budget item, or 2.25% of total expenditures. The Reconstruction Fund was implemented through Special designated and extralegal public contracting, increasing the risk of mismanagement. The applicable legislation for these procedures has also been contested in the Constitutional Court, for limiting economic Constitutional freedoms such as the economic freedoms and creating the conditions for clientelism.
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
Overall, the State Budget Expenditures have been increasing year after year, excluding the years 2010, 2012, 2015 and 2016 when their value decreased in comparison. Since 2005, government spending has increased by 2.8 times, from ALL 259 billion to around ALL 651 billion.
The ratio of Total Expenditures versus the Gross Domestic Product has remained around 30%, reaching its peak in 2009, with 33.1% of the GDP, and falling to the minimum registered in 2012, with 28.2% of the GDP.
Source: Ministry of Economy and Finance
Comments and Analyses: Open Data Albania
Other figures and analysis regarding the State Budget can be accessed in the Open Data Albania platform, in the Economy or Public Finance section.
Download excel: Structure of Expenditures in the State Budget during 2005-2022 period, Current and Capital (non-current, emergency situations)Comments and Analyses: Open Data Albania
Contributed by: Ilir Brasha
Translated by: Rezarta Cushaj
