Sustainable Development and Government Capacity-building Prof. Dr. Árpád Kovács President of the State Audit Office of Hungary Chairman of the INTOSAI Governing Board

2 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

3 Sustainable development Dimensions of sustainability Environmental Social Economic National sustainable development strategy as an integrator

4 Challenge of EU membership Budget deficit Gross public debt Consumer price index Criteria of convergence relevant to fiscal policy and inflation (as % of GDP)

5 Analytical framework Competition Government administration Values and norms Cooperative transactions Change agents for them Domestic International Change generating mechanisms

6 System of interrelations relevant to changes Change generating mechanisms CompetitionGovernment administration Qualifying factors DomesticInternationalDomesticInternational Purpose consciousness A 11 A 12 Method consciousness A 21 A 22 Skill consciousness A 31 A 32 Source consciousness A 41 A 42 Environment consciousness A 51 A 52

7 System of interrelations relevant to changes (cont.-ed) Change generating mechanisms Values and normsCooperative transactions Qualifying factors DomesticInternationalDomesticInternational Purpose consciousness A 13 A 14 Method consciousness A 23 A 24 Skill consciousness A 33 A 34 Source consciousness A 43 A 44 Environment consciousness A 53 A 54

8 Characteristics: Based on the operation of a social model More active role of the state Not 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

9 Options in Hungarian scenarios Characteristics: Maximum responsibility of the individual Decreasing state interventions Enhancing efficiency Probable 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

10 Towards sustainable fiscal balance High budget deficit and public debt in 2006 Stabilisation programme of the Government : stabilisation in a sustainable way with the least possible sacrifice in growth : 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

11 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

12 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