STATE AUDIT OFFICE
- Press Release-
Skopje, 30 December 2025
Identified weaknesses in planning, reallocation, and execution of 2024 budgetary funds
According to macroeconomic indicators published by the Ministry of Finance for 2024, the Central Budget deficit stands at 4,4% of GDP, down from 4,8% in 2023.
The State Audit Office conducted a compliance audit of the planning, preparation, adoption, and execution of the Core Budget of the Republic of North Macedonia for 2024.
2024 Core Budget revenues and expenditures were initially projected at 260.113.617.000 denars, a 0.5% decrease compared to 2023, though still above the maximum approved appropriations. After the August budget rebalance and the December 2024 Decision to reallocate funds among central government budget users and funds, the Core Budget for 2024 rose to 265.418.639.000 denars, an increase of 1% compared to 2023.
The auditors ascertained that, following the Budget rebalance,
- the largest increase compared to the adopted 2024 Budget was recorded in
- expenditures for subsidies and transfers, by 38%, and
- current transfers to extra-budgetary funds, by 17%;
- The largest decrease was made in capital expenditures, by 27%.
Accordingly, 3.330.018.000 denars were allocated for subsidies and transfers, and 3.284.720.000 denars for current transfers to extra-budgetary funds.
The Fiscal Council’s recommendation to stop the practice of reallocating capital funds to current expenditures if capital projects are not implemented as planned was not considered. Had it been implemented, it could have reduced the budget deficit and increased fiscal space for capital investments in the following period.
Regarding the completeness of budget requests submitted by budget users to the Ministry of Finance (MoF) during budget planning, the auditors found that, of the 31 budget requests analyzed, the MoF prepared draft budgets for 16% of them due to the absence of the required strategic plans.
The difference between the maximum expenditures set by the Government, the funds requested by budget users, and the amounts approved in the Budget indicates a risk that the Budget adopted by the Ministry of Finance may not fully reflect the actual needs of budget users to achieve their planned objectives.
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Maximum, requested, approved, and actual expenditures of 2024 Core budget users
The largest discrepancy between the maximum determined expenditures and the approved funds was observed in the budget sections for the Government and the Bureau for Regional Development.
As in previous years, the Ministry of Finance did not submit a report to the Government on the reasons for discrepancies in budget requests.
The auditors highlight the need to strengthen the process of aligning budget proposals between the MoF and budget users to minimize the risk that planned funds fail to reflect the actual needs of budget users and to ensure that the Government is informed of the reasons for discrepancies between requested and approved funds.
The 2024 Core Budget does not provide the legally mandated funding for the Judiciary, the Public Prosecutor’s Office, and balanced regional development, as prescribed by the Law on the Judicial Budget, the Law on the Public Prosecutor’s Office, and the Law on Balanced Regional Development.
The 2024 analysis shows that:
With the Budget Rebalance and the Decision on the Reallocation of Funds between central government budget users and the funds, the approved budget for the Judiciary was reduced by 42.639.000 denars, even though Article 4 of the Law on the Judicial Budget stipulates that, in the event of a budget rebalance, funds allocated for financing the Judiciary cannot be reduced.
At least 1% of GDP should be allocated for the implementation of the subprogram for balanced regional development.
The funds approved through the Ministry of Local Self-Government and the Bureau for Regional Development amount to only 0,08% of GDP, which is 0,01% less than in 2023. Data from the Budget and Funds Sector indicate that, through programs implemented by multiple institutions, these funds reached up to 1% of GDP in 2023 and are significantly
lower compared to the amount realized in 2023, when 3,15% of GDP had been executed for 2022.
According to the Law on Employment of Disabled Persons, the Employment Service Agency of the Republic of North Macedonia (ESARNM) has established a Special Fund to improve the employment and working conditions of persons with disabilities. The Fund is intended to finance activities such as improving employment and working conditions for people with disabilities, workplace adaptation, contributions to pension and disability insurance, contributions to health insurance, employment contributions for the employed person with a disability, pension and disability insurance contributions for all employees in the sheltered enterprise, and the procurement of equipment. The Ministry of Finance allocates funds to the Special Fund within the deadlines and amounts stipulated in Articles 15 and 17 of the Law on Employment of Disabled Persons. We determined that the Ministry of Finance does not transfer funds to the Special Fund’s account, which has also been noted in the final audit reports on the regularity audits of the Employment Agency of the Republic of North Macedonia in previous years.
Under the new fiscal rules set out in Article 10 of the Budget Law, effective from 1 January 2023:
- The general government deficit (for institutions classified under the State Sector, S.13, according to the National Classification of Institutional Sectors by the State Statistical Office) must not exceed 3% of nominal GDP;
- Total general government debt must not exceed 60% of nominal GDP; and
- Guaranteed public debt must not exceed 15% of nominal GDP.
According to macroeconomic indicators published by the Ministry of Finance, the central government budget deficit for 2024 stands at 4,4% of GDP, down from 4,8% in 2023. However, it exceeds the legally established level under the Fiscal Strategy of the Republic of North Macedonia for 2024–2028, where it was projected at 3,4% of GDP.
Budget Deficit as a Percentage of GDP (2015–2024)
Source: Ministry of Finance
Total revenues and inflows in 2024 amounted to 294.025.256.000 denars, representing a 13% increase compared to 2023.
Core Budget for 2024 and 2023 by Types of Revenues and Inflows
The 2024 Budget structure indicates that tax revenues continue to account for a significant share of the Core budget’s revenues, reflecting an improvement in the financial structure.
Budget Structure by Revenues and Inflows
The improvement is the result of efficient revenue collection by the Public Revenue Office and the Customs Administration, as well as a continued upward trend in the collection of VAT, profit tax, personal income tax, and excise duties.
Tax Revenue Realization (2020–20224)
In 2024, an increase was recorded across all types of tax revenues compared to 2023, except for the Solidarity Tax, where a decline was observed since most liabilities for this type of tax were paid in 2023, as well as for one-off separate fees.
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Realization of Tax Revenues by Type of Tax in 2023 and 2024
In 2024, value-added tax (VAT) revenues accounted for a significant 46,7% of total revenues, amounting to a net total of 81.464.958.000 denars, which represents an increase of 16% compared to 2023. Of the total gross VAT collected, amounting to 117.172.184.000 denars, 65% derives from the import of goods, while 34% originates from domestic transactions. VAT refunds to taxpayers of 35.707.227.000 denars represent 30% of the total gross VAT collected.
Personal income tax amounting to 31.852.096.000 denars accounts for 18.26% of total tax revenues and represents an increase of 17% compared to the previous year. As of 1 January 2023, earned income has been taxed at a uniform rate of 10%, except for income from winnings from games of chance, which is subject to a 15% tax rate.
Profit tax accounts for 11,57% of total tax revenues and amounts to 20.185.748.000 denars, representing an increase of 19% compared with the previous year, which is attributable to the higher profits earned by legal entities.
Revenues from the solidarity tax in 2024 totaled 88.858.000 denars, representing a 97% decrease compared to 2023. This decline is because this tax, introduced as a one-off obligation in September 2023 to address the COVID-19 crisis and other anti-crisis measures, was largely collected from legal entities during 2023.
In February 2025, the Constitutional Court of North Macedonia annulled the Solidarity Tax Law due to its retroactive effect, which violated the principles of the rule of law, legal predictability, and legal certainty. As a result, the Ministry of Finance will refund companies that paid this tax for a total of 3.031.838.000 denars (approximately EUR 49.1 million).
Collections of duties administered by the Customs Administration continued to rise in 2024, reaching 121.462.158.000 denars, up 62,5% from 2020 (74.745.721.000 denars).
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Total inflows from domestic and foreign borrowing in 2024 accounted for 33,5% of total revenues of the Core Budget, marking an increase of 2,5% compared with their share of total revenues in 2023.
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Inflows from domestic borrowing accounted for 56% of total state borrowing inflows, reflecting an increase in their share compared with 2023, when they represented 45%. In contrast, inflows from foreign borrowing, amounting to 42.975.791.000 denars, were 4% lower than in 2023.
Total expenditures and outflows of the 2024 Core Budget amounted to 261.716.782.000 denars, representing an increase of 5% compared with 2023. The ratio of actual to planned expenditures and outflows by category for 2024 compared with 2023 is presented in the following table:
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Expenditures for salaries, rents, and allowances in 2024 amounting to 40.542.869.000 denars are 17% higher compared to 2023.
Expenditures for Goods and Services in 2024 amount to 15.644.120.000 denars, representing 5.98% of the total expenditures of the Core Budget for 2024, and show an increase of 4,95% compared to 2023. The execution of expenditures for Goods and Services for 2024 and 2023 is presented in the following chart:
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The structure of funding sources through which the Pension and Disability Insurance Fund (PDIF) provides the necessary amounts for pension payments in 2024 shows no improvement compared to 2023 and 2022. To cover the pension fund deficit, 23.119.600.000 denars were transferred from the Core Budget, representing 26% of the Fund’s total resources for pension disbursement. This indicates the Fund’s continued reliance on financial support to ensure pension payments in the country.
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Total pension expenditure in 2024 increased by 16.27% compared to 2023. This growth is attributable to the pension adjustment of 5.3% implemented on 1 March 2024, due to the linear increase of pensions for 2.500 denars effective from 1 September 2024, as well as the inflow of new pension beneficiaries.
30.781.183.000 denars were disbursed to the Local Self-Government Units (LSGUs) as current transfers during 2024, representing 12% of the total expenditures of the Core Budget. This reflects a 12% increase compared to 2022. The largest share of these transfers consists of block grants (84%), VAT grants (14%), and earmarked grants (2%).
According to Article 47 of the Law on Budget Execution, municipalities were required to return unused block grant funds to the Budget of RNM by 31 December 2024. As of 4 April 2025, 14 municipalities returned 46.097.000 denars, while 16 municipalities did not return 11.585.000 denars. During 2024, the Ministry of Finance issued reminders to ensure the return of these funds. Furthermore, if a municipality submits a request during the current year to increase its grant allocation, the request is not approved for the portion of unused funds that have not yet been returned to the Budget of RNM.
Capital expenditures in the Core Budget for 2024 were executed in the amount of 21.435.177.000 denars, representing 8.19% of total Core budget expenditures. From 2020 to 2023, capital expenditures showed a consistent year-on-year increase; however, in 2024, they decreased significantly by 43% compared to 2023.
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The structure of capital expenditure is presented in the following chart:
The largest share of capital expenditures relates to the purchase of equipment and machinery, accounting for 28,09%, while the smallest share relates to the purchase of furniture (0,04%) and vehicles (0,28%).
Expenditures on investments and non-financial assets in 2024 amounted to 5.980.715.000 denars, representing a 34,59% decrease compared to 2023. The largest amount of these funds, totaling 4.826.295.000 denars or 81%, was used to pay guarantees for public enterprises on unpaid external debt to foreign creditors, specifically:
- 90% for the Public Enterprise for State Roads (PESR) for the Construction Project of the Kičevo–Ohrid highway section, the Miladinovci–Štip highway section, and the National Roads Program – for the first and second tranches.
- 8% for the Railways of the Republic of North Macedonia-Transport (RRNM-T) for the project to procure new locomotives.
- 2% for the Public Transport Company Skopje (JSP Skopje) for the implementation of the bus procurement project for the City of Skopje.
Capital subsidies for enterprises and non-governmental organizations accounted for 5.310.133.000 denars, or 24.77% of total capital expenditures. Of this, capital subsidies for other public non-financial enterprises amounted to 4.669.891.000 denars, with 99% of these funds transferred through the Organizational Code 13001 – Ministry of Transport. Of these funds, 4.100.000.000 denars, or 88%, were implemented by the Ministry through the Subprogram 2M – Investments in Road Infrastructure, for the Construction Project of the Infrastructure Corridor 8 (Tetovo–Gostivar–Bukojčani section and the Trebenishta–Struga–Kjafasan motorway project), and Corridor 10D (Prilep–Bitola motorway section).
Government debt, defined as the total of financial liabilities incurred through borrowing by the State, public institutions established by the State, and municipalities—excluding the debt of public enterprises and trade enterprises, which are fully or predominantly owned by the State, municipalities, and the National Bank—amounted to 8,298 million euros as of 31 December 2024. Compared to the level of government debt as of 31 December 2023 (7.256,2 million euros), this represents an increase of 1.041,8 million euros. As of 31 December 2024, government debt stood at 53.8% of GDP, representing an increase compared to 2023, when it amounted to 49,8% of GDP.
Public debt, defined as the total of government debt and the debt of public enterprises established by the State or by the municipalities, the municipalities within the City of Skopje and the City of Skopje, as well as trade enterprise fully or predominantly owned by the State or by municipalities, the municipalities within the City of Skopje and the City of Skopje, amounted to 9.619 million euros as of 31 December 2024, according to data from the Ministry of Finance. Compared to public debt as of 31 December 2023 (8.477 million euros), this represents an increase of 1.142 million euros, or 13,5%. As of 31 December 2024, public debt stood at 62,4% of GDP, an increase compared to 2023, when it amounted to 58,1% of GDP.
GOVERNMENT AND PUBLIC DEBT AS A PERCENTAGE OF GDP (2015–2024)
Source: Ministry of Finance, data published on 26 May 2025
Regarding the indebtedness of public sector entities, dynamics of project implementation, utilization of credits and loans, paid and incurred costs by state bodies, institutions, JSCs, and PEs, we have identified that the practice of inefficient management of project financing through loans and grants continues.
Of the total approved projects amounting to 230.848.666.000 denars (3.753.942.000 euros), only 37%, or 84.661.063.000 denars (1.376.715.000 euros), have been drawn and utilized. Undrawn funds total 146.187.603.000 denars (2.377.227.000 euros), with associated commission costs of 1.411.889.000 denars (22.959.000 euros), representing less than 1% of their value. The largest share of loans and grants—36%—is implemented through the Public Enterprise for State Roads (PESR), and 2% through the Public Enterprise for Railway and Transport Infrastructure, but project implementation continues at a slow pace.
Regarding the financial instability of local self-government units (LSGUs), the situation with municipal indebtedness shows that, as of December 2024, 10 out of 81 municipalities had blocked accounts. The total amount of enforcement orders submitted to the Ministry of Finance amounted to 1.843.400.000 denars, representing 49% of the municipalities’ reported liabilities, of which 229.823.000 denars were paid in 2024. Of the remaining amount subject to enforcement, 1.123.398.000 denars (69,6%) relates to principal/debt, 351.609.000 denars (21,8%) to interest, and 138.570.000 denars (8,6%) to other costs, indicating a high level of municipal indebtedness. Up to the audit period, no municipality has declared financial instability.
The Public Financial Management Reform Program 2022–2025 is a strategic government document aimed at developing the public financial management system in line with reforms initiated in 2018. Its objectives are to strengthen the fiscal framework, enhance the processes of planning, execution, and reporting of public finances, increase revenue collection, improve the public procurement system, and reinforce internal and external control through greater transparency and accountability in operations.
Considering that the implementation of the new Budget Law, which entered into force on 27 February 2022, has been postponed until 1 January 2026, sufficient time has been provided for the adoption of all bylaws as well as for the establishment of the Integrated Financial Management and Information System (IFMIS). In the report, we disclose information on the slow pace of establishment and implementation of the IFMIS, which is intended to integrate public financial management activities, as a project supported by the World Bank.
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