Smart budget consolidation

Budget consolidation aims at the correction of budget imbalances and the reduction of national debt. There are approaches to defining budget consolidation through the primary budget deficit reduction and through the improvement of the ratio of the adjusted primary balance to potential gross domestic product. As a rule, the focus of budget consolidation measures is associated with the budget expenditure austerity or revenue growth promotion. The study of the International Monetary Fund and the budget consolidation programs of selected OECD countries identified tools and activities that can be classified as hard, aggressive, soft, and smart budget consolidation. The paper provides an overview of budget consolidation tools and their impact on macroeconomic indicators. The empirical analysis completes the study in relation to the national debt sustainability for the domestic economy and the economy of foreign countries. The author analyzes the dynamics of national debt parameters for individual countries, as well as for groups of countries depending on the economic development level, and concludes on the necessity of implementing budget consolidation measures in the post-crisis period. The approaches to budget consolidation are typologized. The key smart tools for smart budget consolidation are the technologies of budget account liquidity management, the technologies of tax administration, electronic public procurement, the “social treasury” mechanism, and pooling of subsidies. Institutional smart tools include rapid budget expenditure reviews, tax expenditure optimization, and the enhancement of the role of budget councils. Smart budget consolidation tools do not depend on the crisis and recovery periods, but are aimed at the permanent efficiency improvement both of expenditures and revenues of the budgets of the budgetary system. Using flexible tools, it is possible to mitigate the negative effects of budget consolidation, including lag. The advantages of smart budget consolidation are proved through the socio-economic effects, which are provided by the education and healthcare expenditures. Correlation-regression analysis showed a direct strong interelation between these expenditures and the income index of the population. The author proposes to increase the level of efficiency of budget expenditures and budget revenues through the application of a dynamic set of budget consolidation tools related to the use of management and digital technologies.