This public expenditure review analyzesrecent developments in the Czech Republic, and futureprospects for growth, with fiscal stability. In analyzingthe strategic setting, where a central thrust of thisstrategy is the accession to the European Union (EU), thereport suggests than an appropriate medium-term target forfiscal policy, would be to bring down the overall deficit ofthe government to one-two percent of GDP, as an intermediatestep towards the EU's stability/growth path objectives,emphasizing that much of the adjustment should come from theexpenditure side. Given the main purpose of the report - totake this expenditure adjustment challenge as a mean toachieve potential efficiency gains, while limiting attendingcosts - a reform policy should pursue an ongoing process ofreview, revision, and re-definition of the role ofgovernment intervention. Indeed, to succeed, the process ofexpenditure reform needs to be firmly grounded in thedevelopment of analytic capacities, linked withinstitutional, and procedural enhancement for fiscalmanagement. The report explores the expenditure reformopportunities, and cost of bank restructuring, focusing onrelieving The Konsolidacni Banka (KoB) from its status as abank, on streamlining recoveries, and asset disposalmethods, and on improving the legal framework for debtresolution. It reviews the state pension program, suggestinglimited indexation to the consumer price index, eliminationof the actuarially unfair aspects of early retirementprovisions, to increase statutory retirement, whileextending the minimum contribution period for full pension.To strengthen fiscal management, it is proposed that themedium-term outlook be expanded into a full-fledgedmedium-term fiscal framework, extra-budgetary funds beconsolidated, and, activity/service-based articulation ofthe state budget be initiated.
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