Budget of the Republic of Macedonia, budgetary process and citizens’ participation Budget – picture of the Government’s priorities   The issue of the state budget, as an area which refers to planning revenues and expenditures of the public sector, in Macedonia is discussed only within institutions and academic circles. The public is not very familiar with this field. However, as a country with a high level of corruption, it is necessary to provide wider availability and understanding of the financial data which are relevant to the public. It will enable more actors in the society to affect responsible management of public assets. In order to contribute to it, the Civic World in this and the next two issues will present the basic concepts related to the state budget, the process of its preparation and the opportunity for the citizens to affect.   Definition of the state budget State budget is a financial plan which presents government’s projected revenues and expenditures for the forthcoming year. The government plans the revenues collected during the year and the manner they are to be collected and it plans expenditures, that is the money that is going to be spent and the manner it is going to be spent. According to the administrative definition given in the Law on Budgets of the Republic of Macedonia (Official Gazette No. 35 from 07.05.2001) “Budget is an annual plan of the functions and obligations of the Republic of Macedonia, local self-government units and funds and it consists of annual estimation of revenues and expenditures by aims”. This Law defines the manner the state budget is planned, prepared, approved, implemented and controlled. Budget deficit and public debt When revenues equal expenditures, the budget is balanced. When revenues are higher than expenditures, there is budget surplus and vice versa, when expenditures are higher than revenues, there is deficit. In case of deficit, the Government has to borrow money or issue money. Public debt is defined as accumulated loans of the state or overall obligations of the Government at a given moment. Public debt can be classified as domestic and foreign, depending on who the creditors are, that is if they are in the country or out of it. Budget’s function The state budget has three main functions: 1.   To show the Government’s main objectives for the given fiscal year; 2.   To serve as an instrument that enables the government to affect the economic situation in the country; 3.   To serve as a system by which control is realized on collecting and spending budget assets. Through its fiscal policy the Government defines the methods and activities it uses in order to find, collect and efficiently use resources for implementation of its program. The fiscal policy is the most important part of the economic policy, involving the policies that enable collecting revenues in the budget, policies for budgetary spending and administration of the public debt. The fiscal policy is used to stabilize the economy when it is in decline or there is high inflation. When the economy is in decline, GDP is also declined, consumers spend less, companies do not invest and they dismiss workers. The government can stop this decline and stimulate the economic activity by increasing the demand, by increasing public consumption, which leads to GDP increase.    Budget’s structure The state budget in Macedonia has two levels: budget of the state (which involves budgets of independent funds) and budgets of local self-government units. In order to determine the overall revenues and expenditures, these budgets are summed up and presented as one budget: state budget. Revenues in the budget are collected mainly through taxes and revenues realized by public enterprises. Expenditures in the budget can be classified in a few ways: economic, administrative and functional classification. Economic classification is necessary for budget analysis and determining the role of macroeconomic and fiscal policy. The main categories of expenditures are: current expenditures, which involve short-term expenditures for services and goods necessary for implementation of government’s activities and capital expenditures, which imply capital assets and transfers. Administrative classification shows who spends the money, that is, expenditures are arranged according to administrative units that use the given budget funds (e.g. Ministry of Justice, Ministry of Health etc.). Functional classification shows why the money is spent: health, education, public peace and order etc. If certain funds are given to certain ministry, it is not necessary to imply that it is spent in the sector covered by that ministry. For example, expenditures for a military health institution are shown as expenditures of the Ministry of Defense, but, based upon the functional classification, they are health expenditures, just as the expenditures for a military academy are education expenditures.