BudgetRigidityandExpenditureEfficiencyinSlovenia-IMF.PDF

WP/07/131 Budget Rigidity and Expenditure Efficiency in Slovenia Todd Mattina and Victoria Gunnarsson © 2007 International Monetary Fund WP/07/131 IMF Working Paper Fiscal Affairs Department Budget Rigidity and Expenditure Efficiency in Slovenia Prepared by Todd Mattina and Victoria Gunnarsson Authorized for distribution by Gerd Schwartz June 2007 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper assesses the relative efficiency and flexibility of public spending in Slovenia compared to the advanced and new EU member states. Spending on health care, education, and social protection is relatively high in Slovenia without achieving correspondingly better outcomes. Inefficiencies appear to stem from the financing mechanisms for social services, institutional arrangements, and the weak targeting of social benefits. In addition, the composition of spending appears to be strongly tilted towards nondiscretionary items that reduce the fiscal room for maneuver. Greater flexibility is needed to facilitate the reallocation of relatively inefficient expenditure into higher priorities. In this manner, medium-term expenditure rationalization can focus on reducing inefficient outlays rather than restraining traditionally flexible comp