Public finances

More certainty for the 2022 budget

Finance minister Pierre Gramegna says the grand duchy is  is well on the way to normalisation in terms of public finances. (Photo: SG9LU/archives)

Finance minister Pierre Gramegna says the grand duchy is is well on the way to normalisation in terms of public finances. (Photo: SG9LU/archives)

With two weeks to go before the government presents its budget for 2022, minister of finance Pierre Gramegna says the government may have room for manoeuvre.

"The figures show that the country is well on the way to normalisation," said finance minister Pierre Gramegna (DP) as a message of reassurance two weeks before the State of the Nation address and the presentation of the draft budget for 2022. Data should allow the ministry "to approach the next budgetary year with more serenity,” Gramegna says . On Friday 1 October, during a meeting of the parliamentary finance and budget committee and the committee for the control of the budgetary executive, Gramegna presented the state’s financial situation as of 31 August 2021.

Deficit lower than forecast

Total revenue collected by the central government amounted to €14.4bn, an increase of 20.2% compared to the end of August 2020, after a year strongly marked by the pandemic. Expenditure was down by 2.3% to €14.5bn, which can be explained by there being less recourse to short-term state aid used to help businesses with their cash-flow during the lockdown. However, compared to 2019, public spending is still up by 15%.

The result is an improvement in the central government balance from €-2.9bn on 31 August 2020 to €-124m.

The ministry points out that the significant expenditure still has to be taken into account, such as the disbursement of funds made available to the tune of €100m to deal with the consequences of last July's floods. "It is already possible to state that the deficit will be lower than forecast last April in the stability and growth programme,” the ministry states.

A public debt of €17.9bn

The direct tax administration collected €6.5bn in revenue, a rise of 16.3% compared to August 2020 and 6.2% up on 2019. Similarly, revenue of the registration, domains and VAT administration amounted to €4.6bn, an increase of 28.1% in one year and up 17.5% compared to 2019. This reflects a recovery in consumption in Luxembourg. Customs and excise administration revenue amounted to €1.2bn, an increase of 14.5% on last year and 1.7% on 2019. This is explained by the drop in the quantity fuel sales linked to teleworking during the pandemic, but also by the increase in prices.

Public debt remains stable, at €17.9bn, or 25.9% of GDP, which is “well below" the 30% mark set in the government's programme, the ministry announced with some glee. But it is still cautious. "The figures for the end of August confirm the validity of the government's economic policy throughout the crisis and the flexible management of the pandemic. While welcoming the positive evolution of public finances, caution must remain the order of the day in the execution of the budget in order to accompany the recovery in a balanced manner."

This article was originally written in French for Paperjam and has been translated and edited by Delano