Budgetary reserve in Serbia: a non-transparent channel for discretionary spending of public money

The legal framework distinguishes between current and permanent budget reserves. According to the Law on the Budget System, funds from the current budget reserve are used for unplanned purposes for which appropriations have not been determined, or for purposes for which existing appropriations have proven insufficient during the year. The Government decides on the use of these funds, upon the proposal of the Minister of Finance, and the funds are allocated to direct beneficiaries of budget funds during the year. In contrast, the permanent budget reserve has a significantly narrower purpose and is used to mitigate the consequences of extraordinary circumstances, such as natural disasters, ecological catastrophes, and other emergencies that may threaten human life and health or cause large-scale damage.

Precisely because of the broadly defined purpose of the current budget reserve, the transparency of individual decisions regarding its use is particularly important. The law allows for flexibility in budget execution, but this flexibility must be accompanied by clear explanations of the purpose, beneficiaries, and reasons why an expenditure is financed from the reserve, rather than through regular budget programs. Otherwise, the current budget reserve can become a channel for discretionary redirection of funds during the year, with limited public insight into the allocation criteria.

According to the data available to CEVES, which relates to approximately 8 billion dinars of used funds from the current reserve, the management of budget reserves in Serbia remains highly non-transparent and highly discretionary.

It is important to emphasize that this amount does not represent the total use of the current budget reserve mechanism in 2024. The final account distinguishes between direct decisions on the use of current budget reserve funds, which are subject to this detailed CEVES classification, and a significantly larger amount of reallocations carried out through the current budget reserve under Article 61 of the Law on the Budget System. According to this latter mechanism, funds are first entered into the current budget reserve from existing appropriations and then allocated to other beneficiaries, programs, or purposes. In 2024, this broader reallocation channel amounted to approximately 77 billion dinars, bringing the total use of the current budget reserve mechanism to about 85 billion dinars, or slightly over 700 million euros.

Viewed according to the program classification of the budget, for more than half of the items, it is not possible to identify a corresponding budget program in the available data. Among the items for which a program classification exists, about 20% of the funds relate to program 2102 – Support for Government Operations, 12% to program 0702 – Implementation of infrastructural projects of significance for the Republic of Serbia, while 6% constitutes program 1508 – Regulation and supervision in the field of economic and regional development. Other programs have individual shares below 5%, including programs 0603 – Support for the operations of institutions in AP Kosovo and Metohija and 0903 – Family-legal protection.

An even more pronounced concentration is observed when funds are viewed by beneficiaries of the budget reserve. As much as 72% of the analyzed amount was allocated through the General Secretariat of the Government, while the Ministry of Finance and the Ministry of Economy participated with 12% and 6%, respectively. Such a structure indicates that a significant portion of budget reserve funds is not allocated through clearly identifiable sectoral programs and line ministries, but through a centralized channel within the Government. This reduces the possibility of public insight into the purpose and allocation criteria of these funds, further opening up space for discretionary and insufficiently transparent management of the budget reserve.

CEVES further classified the used budget reserve by purpose categories. According to this classification, over one billion dinars from the budget reserve were directed towards sports associations. The data show that these transfers were intended as grants, i.e., aid to football, tennis, and basketball sports federations, with funds realized through the General Secretariat of the Government. Approximately 130 million dinars from the budget reserve were directed to religious organizations, including eparchies of the Serbian Orthodox Church, the Archdiocese of Belgrade, and other religious organizations. In addition, approximately 500 million dinars each were used for humanitarian purposes, including assistance to children with serious illnesses, as well as for the Government's obligations based on certain court proceedings and judgments. A smaller portion, around 70 million dinars in this data, was intended for EXPO. The limitation of this analysis is that the purpose cannot be identified for the entire amount of the used budget reserve. Out of approximately 8 billion dinars for which CEVES has data, the purpose can be classified for only 3.7 billion dinars, while for the remaining amount, there is no description of expenditure in the available data. The very fact that the purpose cannot be determined for a significant portion of the funds further indicates insufficient transparency in the management of the budget reserve.

All of this is confirmed by the analysis of the Fiscal Council, which shows that since 2018, the Government has used the budget reserve close to the legally prescribed maximum amount of 4% of budget revenues, and that from 2018 to 2023, approximately 2.6 billion euros were redirected through the budget reserve. The Fiscal Council also warned that the current budget reserve in Serbia has not only been used as a technical instrument for unforeseen expenditures but also as a channel for implementing ad hoc economic policies that have not gone through the regular phases of planning, budgeting, and parliamentary control.

CEVES's and the Fiscal Council's findings together indicate that the current budget reserve in Serbia functions as an instrument with broad discretion and limited accountability. Furthermore, the budget reserve is concentrated among a small group of beneficiaries, with incomplete programmatic classification and a purpose that remains unknown for almost half of the funds.
Greater transparency of individual decisions on the use of the reserve, along with more consistent disclosure of the rationale for its purpose and beneficiaries, is a prerequisite for stronger parliamentary and public oversight of this part of budget spending.