Shrewd State Fiscal Policy Results in €181m Revision

On Thursday 5 October 2017, Pierre Gramegna, Luxembourg’s Minister of Finance, presented to the Budget Implementation Control Committee, and the Committee on Finance and Budget, the draft law regulating the state’s finances for 2016.

The settlement of the general account makes it possible to compare the draft budget adopted by the Chamber of Deputies with the budget as it was actually carried out during the year.

For 2016, the general account, adjusted for three exceptional transactions, shows a balance of €-256.8 million, an improvement of €181.4 million compared to the voted budget. In particular, current expenditure remains €-44 million lower than expected. The gap between estimates at the time of the preparation of the draft budget and the general account is 2.7% at the revenue level and 1.3% at the expenditure level.

The above-mentioned exceptional transactions include the repayment of three bank loans in the amount of €400 million, incurred in 2006 and due to expire in 2016, additional allocations to the Railway Fund and the Road Fund, as well as the increase in Luxembourg’s share in the International Monetary Fund (IMF), to the tune of €285 million.

A more complete view of the economic reality of the implementation of the budget was provided by a presentation in accordance with the accounting standards of the ESA 2010 (European accounting system). It also shows that the state’s financial situation has clearly recovered from the voted budget.

The central government balance in 2016 rose from €-63 million (-1.2% of GDP) to the budget voted at €-211 million (-0.4% of GDP) according to the latest available figures, an improvement of €+422 million (+0.8 points of GDP). This has resulted in a substantial upward revision of the general government balance of central government, local government and social security. The general government surplus remains largely surplus and thus stands at €+845 million (+ 1.6% of GDP) for 2016, i.e. €577 million more than forecast.

Minister Gramegna commented: “The general account for the financial year 2016 shows a favourable trend towards the presentation of the budget for 2018. The result in the current budget emphasises that operating costs are under control while revenues are developing favourably. This result confirms the good development of Luxembourg’s public finances and the soundness of the government’s fiscal policy guidelines.”