The state budget is the main instrument for implementing the fiscal policy of the Government. On the one hand, the budget has a direct impact on the Government debt, inflation, economic growth and employment, and on the other hand, the economic environment and the implemented fiscal policy determine the volume of collected revenues and the directions of expenditures. Therefore, it is important to begin the budget analysis with the study of the fiscal policy.
When analyzing the annual budget, it is first necessary to calculate the change (increase or decrease) in total budget revenues and total expenditures, and, if necessary, compare them with the increases of previous years.
The next important statistic is the level of the budget deficit formed as a result of planned revenues and expenditures, its comparison with the levels of previous periods.
Of course, the analysis of the deficit financing structure and changes in its components is also important. This analysis will provide an opportunity to understand the borrowing requirement of the country, that is, the possible amount of change in the public debt, as well as from what sources the Government will borrow: from the outside world or from the population of our country or from other internal sources.
In general, when analyzing summary budget statistics, it is important to compare their levels in relation to GDP, i.e. to calculate the weight of each of the summary indicators in GDP, which creates an opportunity to take into account economic developments in the analyzes and in this regard to have comparable levels compared to previous years, as well as to ensure indicators applicable for international comparisons. This applies to the discussion of revenue/GDP, expenditure/GDP as well as budget deficit/GDP ratios.
When making comparisons between different countries, marzes or sectors, it is important to study the per capita levels as well, in addition to the calculations of the weights in the GDP.
To understand the economic content of costs, it is important to at a minimum to analyze the structure of budget costs according to current and capital costs. Understand the weight of each of these and its change during the fiscal year under review.
These analyzes can equally be carried out both at the level of the planned budget and at the level of the actual budget. In the first case, it allows to assess what kind of spending policy the government plans and what economic development forecasts are based on it, as well as to what changes in the country’s obligations the chosen policy may lead. The actual budget analysis records the facts and results of the implemented fiscal policy in a specific budget year.
It is also very important to compare the relevant indicators of the planned and actual budgets. It is known that for various objective reasons, government can revise and adjust the budget document during the year. Therefore, the government usually compares the performance indicators of the budget with the adjusted budget indicators. Meanwhile, if the public seeks to assess the quality of planning and implementation of policies by the government, consistency and volume of budget changes during the year, then it is advisable to compare the indicators of the budget implementation with the indicators planned by the budget law of the same year. For the same purpose, the adjusted levels of budget expenditures can also be compared with the corresponding indicators approved by the budget law.
