For the past 12 years, Serbia’s Fiscal Council has distinguished itself from other state bodies by maintaining independence and resisting alignment with the ruling regime’s propaganda. This raises the critical question: How will recent changes in its composition affect its future work?
Historical context and purpose
Fiscal councils began emerging globally after World War II, with more widespread formation occurring in the 1990s and following the World Financial Crisis. Today, around 50 countries have established such councils. Serbia’s Fiscal Council was created in 2011, making it one of the first in Central and Eastern Europe. Its core responsibilities include analyzing and assessing fiscal policy measures, evaluating fiscal sustainability, and verifying government macroeconomic forecasts.
The fundamental purpose of fiscal councils is to provide an independent evaluation of fiscal policies, mitigating the risk of governments using fiscal policy to serve party or personal interests. Historically, governments may prioritize short-term gains, like increased consumption and reduced taxes before elections, potentially leading to long-term fiscal imbalances and crises. Fiscal councils aim to counteract these tendencies by offering impartial analyses.
The role of Fiscal Councils
Fiscal councils do not create fiscal policy or sanction governments; their influence is exerted through independent analyses and evaluations. These analyses can impact public perception and government accountability, provided they are accessible and supported by a free media. In developed democracies, fiscal councils help ensure that fiscal policies align with long-term societal interests rather than short-term political gains.
In Serbia, the need for a fiscal council was particularly pronounced due to the country’s historical challenges with fiscal policy abuses, including public debt crises and periods of hyperinflation. The Serbian Fiscal Council’s formation was crucial for providing objective analysis amid a backdrop of limited professional capacity in the Ministry of Finance and public enterprises.
The Fiscal Council’s track record
Over the past 14 years, the Serbian Fiscal Council has been actively analyzing budgets, fiscal strategies, and public enterprises. It has offered recommendations to avoid potential crises, such as proposing a fiscal consolidation program in 2012 to curb public debt without affecting public sector salaries and pensions. Despite its recommendations being largely ignored at the time, the government eventually adopted a more stringent consolidation program in 2014.
The Council has also supported necessary but unpopular measures, such as pension and salary cuts, and criticized management issues within public enterprises like EPS. Its work has included exposing the impact of corruption on economic growth and proposing reforms in various sectors, receiving positive evaluations from international bodies like the IMF.
Impact of Recent Changes
Recent changes in the Fiscal Council’s composition raise concerns about its future role. In 2020, Vladimir Vučković resigned, and Bojan Dimitrijević, previously affiliated with the ruling SNS party, was appointed. This year, Blagoje Paunović replaced Pavle Petrović as president. These changes might influence the Council’s objectivity and effectiveness.
It is anticipated that the Fiscal Council may adopt a more favorable view of government policies and reduce its critical analysis. A decrease in the Council’s agility and the scope of its analyses could occur, potentially leading to its role becoming more aligned with government interests rather than serving as an independent evaluator.
If the Fiscal Council becomes less independent, it risks losing its core purpose of providing unbiased, high-quality analyses of government policies. The departure of skilled researchers could further impact the Council’s effectiveness. However, there remains a possibility that it could continue to function effectively within its legal mandates and best practices, although maintaining the current level of analysis quality might be challenging without Pavle Petrović’s key leadership.
