Efficient Public Spending: Pathways for Fiscal Sustainability

Slovakia’s fiscal position has weakened considerably over the past 15 years, with public debt and expenditure rising faster than in peer countries. Given limited scope for additional revenue-based consolidation, policy efforts will increasingly need to focus on the expenditure side. This paper benchmarks the level, efficiency and allocation of public spending in Slovakia relative to peer countries to identify reform areas that can generate savings and strengthen the country’s fiscal position. Most of Slovakia’s recent increase in public expenditure is mainly due to rising spending on social protection, driven by intensifying demographic pressures as well as generous pension and family benefits. At the same time, spending efficiency gaps relative to international benchmarks span multiple government functions. Policy measures aimed at (i) increasing the efficiency of public service delivery, (ii) ensuring that social transfers are specifically targeted at the most vulnerable and (iii) reallocating resources toward more growth-enhancing areas have the potential to improve the fiscal outlook and safeguard long-term debt sustainability.