Discussions on fiscal transparency were held in Bratislava during June 13–20, 2002. The staff team, comprising Messrs. Cangiano (head), Young, and Ms. Zakharova met with officials from the Minisuies of Finance, Labor, Privatization, Economy, the National Statistics Office, the National Bank of Slovakia, the National Property Fund, the Public Procurement Office, the Antimonopoly Agency, the Regulatory Organization of Network Industry, the Financial Market Authority, and selected state-owned enterprises and subsidized units. The staff team also met with representatives of entrepreneurs’ associations, the EU ambassador in Bratislava, the Slovak Governance Institute, and Transparency International.
The Act on the Abolition of Some State Funds came into effect on January 1, 2002, except for provisions pertaining to the State Housing Development Fund that will become effective as of January 1, 2003. The Act dissolved 10 out of 12 extrabudgetary funds; their functions have been absorbed by the relevant state budget chapters.
The Agency was created by transforming the Agricultural Market Regulation Fund. Its main function is to support the production, purchase, and sale of selected agricultural and food products. To this end, it issues regulations, promotes sales and consumption of some products, and exercises supervision over market organisation. Given that its financing sources are partly derived from the state budget, and that its budget is executed according to the 1995 Act on Budgetary Rules, as amended, as a subsidised organisation of the ministry of agriculture, the agency should be included in central government.
Slovenska Konsolidacna (SK) is a state-owned joint stock company receiving repayable financial facilities to assist with the recovery of nonperforming loans. Its resolutions are approved by an independent board.
Amendments to the Act on State Aid were adopted in November 2001. In conformity with the EU’s acquis communautaire, the Act specifies conditions for the provision of state aid to sensitive sectors, to higher territorial units (regions), and to small- and medium-size enterprises.
These include some 50 state-owned enterprises and about 200 joint stock companies where the government maintains control. These companies are incorporated under the Commercial Code and are subject to the State Company Act. An exception is Slovak Railways that is governed by the Slovak Railway Act.
The aid is administered by the Agency on State Aid and conforms to EU legislation that requires aid to be in the public interest. The Agency publishes an annual report on its activities, which appears in the Commercial Bulletin and on its official web site http://www.usp.sk.
Since the beginning of 2001, the government has taken some steps to restructure the railway company. In particular, passenger and freight railway transport was separated from the railway track, and a Railway Company was created and became operational in January 2002.
Whereas electricity generation and distribution companies are up for partial privatization in 2002, transmission of electricity will remain in government hands. The planned elimination of cross-subsidization in 2003 would be an important step in establishing a transparent tariff-setting mechanism for the electricity sector.
The 1995 legislation prohibited the privatization of 26 companies, classified as natural monopolies, including the gas company, electricity company, the post, telecommunications, and the railway company.
In 2000, the government sold a 51 percent stake in Slovak Telecom to Deutsche Telekom. In 2001, privatization was mainly carried out in the banking sector, which was governed by the strategy for privatization of state banks passed by parliament in May 1999. In March 2002, the government sold a 49 percent stake in the gas utility company, a sale that yielded Sk 130 billion (13 percent of GDP in 2001). The sale of a 49 percent stake in the distribution part of the electricity company is expected to be completed by end 2002. Companies currently slated for privatization include the Postal Bank, remaining Slovak Bus Transport operations, remaining healthcare establishments, water and sewage utilities, and shares in the property of companies in the portfolio of the NPF.
RONI is an independent agency whose six-person council is appointed by the president. Its resolutions are published in the Official Gazette and are available on its website http://email@example.com.
Since November 2001, capital markets and the insurance industry have been supervised by the Financial Market Authority (FMA). Under the new laws passed in 2002, the FMA was specifically given wide powers of enquiry and supervision and can now impose a range of remedial measures and penalties to address violation of laws, regulations, and terms and conditions of its permits or licenses.
After privatization of these banks is completed, the only government holding in the banking sector will be a 10 percent equity share in the Slovak Savings Bank, with the Austrian Erste Bank remaining the majority holder.
Effective September 2002, the Act on Budgetary Rules will allow for this possibility.
Tax and customs administrations legislation has been substantially revised over the last year in conformity with the EU’s acquis communautaire. Under the taxation chapter, closed on March 21, 2002, a Tax Investigations Office and a Large Taxpayer Unit are being established; tax confidentiality provisions specifying requirements for the disclosure of information to relevant authorities of another state and provisions pertaining to international assistance and cooperation procedures have been strengthened.
The State Budget includes, in addition to the law itself, an explanation of the annual budget law describing its main policies, objectives, and priorities, an administrative (by chapter) classification of spending, details on reserves and earmarked funds, transfers to municipalities, a schedule of maturing debt, and background on the economic outlook. The Annex to the State Budget contains details on revenues, expenditures by chapter, limits on capital expenditures, a schedule for payments of loan guarantees, detailed spending by function, transfers to municipalities, limits on employment and wages by budget chapter, and transfers to subsidized budgetary institutions. The Expenditures of Budgetary Chapters Prepared with Program Budgeting provides details on expenditures by budget chapters and on the utilization of the transfers to subsidized budgetary institutions. The Budgets of Other Elements of the Public Finance contains details on the operations of the other components of general government, including state funds, social security funds, municipalities, and privatization funds; summary information is also presented for nonconsolidated general government. The SFV presents information on consolidated general government and government bodies outside central government. All these documents are available at the MOF website http://www.finance.gov.sk/.
Detailed information on defense spending and defense policy is available in English on the ministry’s of defense website, http://www.mod-gov.sk. and on the website of the Slovak mission to NATO, http://www.nato.int/pfp/sk/slovakial.htm.
While this may result in undue discretion in the issuance of guarantees on a yearly basis, a draft public debt law is addressing this issue by setting an overall cap in nominal terms on the outstanding stock of government guarantees.
The Slovak Republic subscribes to the IMF Special Data Dissemination Standard (SDDS) and meets all dissemination standards with respect to coverage, periodicity, and timeliness of the requisite fiscal data. The data are available in Slovak and English on the MOF website http://www.finance.gov.sk.
Principal adjustments are to convert revenues and expenditures to an accruals basis (mainly interest payments), to exclude financial transactions, and to include the activities of Slovenska Konsolidacna.
For instance, the following studies were prepared in 2000 and 2001: Strategy of Social Security Reform in the Slovak Republic, which includes a section on “Financing of Pension Schemes in 1996–2015 with Outlook to 2040;” and the Long-Term Tendencies in Selected Spheres of Slovak Society Until 2015, prepared by the Forecast Institute of the Slovak Academy of Sciences and discussed at the State Economic Board in June 2000; and the Draft National Strategy for Sustainable Development.
While the NBS reports on the basis of the bank coding criteria, the quarterly reports of the ministries and state funds are classified in terms of the economic codes, given in the classification manual.
In practice, it is considered by the Committee on Budget, Finance, and Currency.
As of June, 26 of the 30 chapters have been provisionally closed. The chapter dealing with financial and budgetary provisions remains open, largely because of measures required to strengthen administrative capacity to manage EU resources. The Slovak Republic fulfills political and democratic criteria. Important steps were taken to strengthen judicial independence and further progress was obtained in the fight against corruption, notably in translating and implementing the government’s Plan for the Fight Against Corruption into concrete actions. The November 2001 Regular Report from the European Commission on Progress Towards Accession referred to the Slovak Republic, for the first time, as a functioning market economy which should be able to cope with the competitive pressures of the EU single market.