Bronic, Mihaela

Policy Documentation Center

 1          PRESS RELEASE     l     No. 43     l     Institute of Public Finance     l     ISSN: 1848-4085     l     doi: 10.3326/pr.2012.43 
The Revision of the Croatian State Budget for 
2012 : Why are the expenditures of the State 
Budget rising? 
 
 
MIHAELA BRONIĆ, PHD, Institute of Public Finance, Zagreb 
 
 
On November 15, the Croatian Government sent the Parliament a revision of the state budget for 
2012.1 Revenues for 2012, after the revision, came to 110.3 billion kuna (1.4 billion more than had been 
planned), and expenditure to 120.3 billion kuna (or 1.5 billion more than had been planned). The 
budget deficit now comes to about 10 billion kuna, which is 94 million kuna more than was planned 
earlier (Table 1). Since revenues and expenditures rose by similar amounts, the revision did not have 
any very significant impact on the state budget deficit. 
 
Table 1: Total revenues and expenditures of the state budget (in millions of kuna) 
 
2011 Plan 2012 
Revision of 
2012 
Enlargement or 
reduction by the 
revision 
Revenue and expenditure account 
    Total revenues 107,417 108,950 110,343 1,393 
Total expenditures 121,425 118,841 120,328 1,487 
Deficit -14,008 -9,891 -9,985 -94 
Source: Government of the Republic of Croatia, 2012 
 
In what follows below the objective is briefly to analyse the budgetary expenditures that were most 
increased in the revision. Table 2 gives a breakdown of expenditures that increased by more than 50 
million kuna; in total they amount to almost 2.5 billion kuna. 
 
The question necessarily arises where the 2.5 billion kuna increase in expenditure via the revision of 
the budget as shown in Table 2 comes from, if at the beginning of this article we said that the 
expenditures would not be more than 1.5 billion kuna in excess of those planned earlier. Expenditures 
really will be more than 1.5 billion in excess of those planned earlier, but in the revision there is also a 
change in the structure of the expenditures previously planned. Certain items of the previously 
planned expenditures have been decreased (most of all material costs, expenditures related to non-
financial assets [i.e. investment projects] and grants), and instead of them, some other expenditures 
have been financed. For example, the Ministry of Science, Education and Sport has given up on some 
previously planned capital investments: in the pupils’ hostel in Bjelovar (5 million kuna), in the Artisan 
School in Sisak (5 million kuna) and in the Mijat Stojanović Elementary School in Babina Greda (5 
million kuna). In this way it has provided some of the money for increasing expenditures for the wage 
bill. 
                                                          
1 Government of RC., 2012. Draft Proposal for Amendments to the Government Budget of the Republic of Croatia for 2012. 61st session 
of the Government, November 15, 2012. 
No. 43 Zagreb December 5, 2012 
 11          PRESS RELEASE     l     No. 43     l     Institute of Public Finance 
Table 2: Expenditures of the state budget that were increased by more than 50 million kuna in the 
revision (in millions of kuna) 
* According to an economic classification of the budget, this expenditure is booked under payments to 
individuals and households. 
Source: Government of the Republic of Croatia, 2012 
 
The major proportion in the considerably increased expenditures analysed in Table 2 is taken by 
wages and reimbursement of employee costs (54%) (in the Ministry of Science, Education and Sport, 
the Ministry of Health, the Interior Ministry and the Ministry of Defence), expenditures on interest 
payments (15%) (for bonds issued on the American market) and subsidies from the Ministry of the 
Economy and the Ministry of Agriculture (20%) (most of it going to the shipyard in Split). 
 
 
 
  
  Spending agency Expenditure items increased by more than 50 million kuna 
Increase 
in million 
kuna 
Proportion 
of total 
increase 
(in %) 
1. 
Ministry of Health – Cro. 
Inst. Health Insurance 
expenditures for employees of healthcare 
institutions – hospital health protection* 510 21 
2. Ministry of Finance interest on bonds issued abroad 361 15 
3. Ministry of the Economy subsidies – restructuring of the ship industry 290 12 
4. Interior Ministry 
gross wages and contributions for 
administration and governance 235 9 
5. 
Ministry of Science, 
Education and Sport 
elementary education – gross wages and 
contributions 195 8 
6. Ministry of Agriculture 
subsidies – incentivising farm production and 
market interventions 139 6 
7. 
Ministry of Science, 
Education and Sport 
secondary education – gross wages and 
contributions 128 5 
8. Ministry of Finance  
pensions fund – payment of the last instalment 
of the debt to retirees* 100 4 
9. 
Ministry of Science, 
Education and Sport 
elementary education – reimbursement of 
employee costs 80 3 
10. 
Ministry of Labour and the 
Pensions System old age pensions* 79 3 
11. 
Ministry of Science, 
Education and Sport 
tertiary education – U. of Zagreb - gross wages 
and contributions 74 3 
12. 
Interior Ministry 
gross wages and contributions for 
administration and governance of the system of 
the state borders 68 3 
13. Ministry of the Economy 
payments to individuals and households – 
shipbuilding* 61 2 
14. Ministry of Finance grants to areas of special national concern 60 2 
15. Ministry of Defence 
reimbursement of employee costs – 
peacekeeping missions 55 2 
16. Ministry of Finance budgetary reserves 50 2 
  TOTAL   2,485 100 
 111          PRESS RELEASE     l     No. 43     l     Institute of Public Finance 
Graph 1. Structure of state budget expenditures that went up the most in the revision of the budget 
 
Source: Government of the Republic of Croatia, 2012 
 
Table 2 and Graph 1 depict fairly well the most important problems of the expenditure side of the state 
budget, the reform of which has been deferred for years (reform of wages in public services, reform of 
the healthcare and pensions systems, privatisation of the shipyards and reform of local and regional 
self-government). It would be good if the Government implemented such reforms as soon as possible, 
for this would enable a long-term reduction of the deficit, of the public debt and the debt servicing 
that are all burdens on the state budget.  
 
 
interest 15% 
subsidies 20% 
gross wages, 
contributions and 
reimbursement of 
employees’ costs  54% 
grants – areas of 
special national 
concern  2% 
budgetary reserves   
2% 
pensions fund   
4% old age pensions 3% 


Press release no. 43. The revision of the Croatian state budget for 2012: Why are the expenditures of the state budget rising?

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