Sustainable Development and Government Capacity-building

Prof. Dr. Árpád KovácsPresident of the State Audit Office of

HungaryChairman of the INTOSAI Governing

Board

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Content of presentation

1. Sustainable development

2. Challange of EU membership

3. Analytical framework

4. Options in Hungarian scenarios

5. Towards sustainable fiscal balance

6. Role of the State Audit Office

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Sustainable development

• Dimensions of sustainabilityEnvironmentalSocialEconomic

• National sustainable development strategy as an integrator

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Challenge of EU membership

2006 2007 2008 2009

Budget deficit 10.1 6.8 4.3 3.2

Gross public debt

68.5 71.3 72.3 70.4

Consumer price index

3.5 6.2 3.3 3.0

Criteria of convergence relevant to fiscal policy and inflation(as % of GDP)

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Analytical framework

• Competition

• Government administration

• Values and norms

• Cooperative transactions

• Change agents for themDomesticInternational

Change generating mechanisms

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System of interrelations relevant to changes

Change generating mechanisms

Competition Government administration

Qualifyingfactors

Domestic International Domestic International

Purposeconsciousness

A11 A12

Methodconsciousness

A21 A22

Skillconsciousness

A31 A32

Source

consciousnessA41 A42

Environmentconsciousness

A51 A52

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System of interrelations relevant to changes (cont.-ed)

Change generating mechanisms

Values and norms Cooperativetransactions

Qualifyingfactors

Domestic International Domestic International

Purposeconsciousness

A13 A14

Methodconsciousness

A23 A24

Skillconsciousness

A33 A34

Source

consciousnessA43 A44

Environmentconsciousness

A53 A54

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• Characteristics:Based on the operation of a social modelMore active role of the stateNot a „warming-up” of the so-called welfare state

concept but a more efficient social supply system

• Applied, to a great extant, in the early 1990’s• Driving forces: low living standards, change

of the political system

Options in Hungarian scenarios

Social cohesion scenario

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Options in Hungarian scenarios

• Characteristics:Maximum responsibility of the individualDecreasing state interventionsEnhancing efficiencyProbable social insecurity, tensions

• Applied between 1995 and 2000 in Hungary• From 2000 the so-called experimental

scenarios gain ground promising both: Change of social systems Improvement of competitiveness

Competitiveness scenario

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Towards sustainable fiscal balance

• High budget deficit and public debt in 2006• Stabilisation programme of the Government

2006-2009: stabilisation in a sustainable way with the least possible sacrifice in growth

2009-2011: commencement of the process of lasting economic growth and improvement of living standards on the basis of the established equilibrium

• SAO’s opinion on the new Convergence Programme

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Role of the State Audit Office

• Intentions: help to create fiscal balance implement reforms promote sustainable development

• „“Thesis of Regulating Public Finances” for the National Assembly

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Main messages of the “Thesis”

• Laying down basic principles for comprehensive regulation of public sector

• More transparent, predictable and efficient management of public finances

• Better cooperation between the public and private sector

• Introduction of rule-based budgeting and programme budgeting

• Modernization of public financial IT system• Attainability of long-term financial sustainability