On Friday 1 October 2021, Luxembourg's Minister of Finance, Pierre Gramegna, presented the country's public finances as of 31 August 2021 during a joint meeting between the Finance and Budget Committee and the Budget Execution Control Committee of the Chamber of Deputies (Parliament).
The update came two weeks ahead of the presentation of the 2022 draft budget.
According to the European System of Accounts (ESA 2010), the total revenue collected by the central government at the end of August amounted to €14.4 billion, up 20.2% over one year. This rebound should also be considered in relation to the context of the COVID-19 pandemic and related restrictions last year.
Central government expenditure amounted to almost €14.5 billion, down 2.3% compared to the previous financial year. According to the Ministry of Finance, this decrease is explained by the reduced use of financial aid schemes put in place in the context of the economic recovery. Compared to 2019, however, public spending increased by 15%, which, according to the ministry, testifies to the ambitious investment policy carried out by the government to prepare the country for the challenges of the future.
The increase in government revenue and the decrease in public spending overall show a positive jaws effect which leads to a considerable improvement in the central government balance, which rose from -€2.9 billion at the end of August 2020 to -€124 million as of 31 August 2021. The Finance Ministry recalled that significant expenditure would still have to be made in the coming months, including the disbursement of €100 million to deal with the consequences of the July floods.
Regarding tax revenues, the administration of direct contributions (Administration des contributions directes - ACD) collected around €6.5 billion by the end of August 2021, which represents an annual increase of €917 million or 16.3%. Compared to the same period in 2019, ACD's total revenues increased by 6.2%.
Revenue from the administration of registration, domains and VAT (Administration de l'enregistrement, des domaines et de la TVA - AED) amounted to €4.6 billion, up €1 billion or 28.1% over one year. Compared to 2019, revenue was up 17.5%.
Moreover, revenue from the Customs and Excise Agency (Administration des douanes et des accises - ADA) amounted to almost €1.2 billion, which represents an increase of €149 million or 14.5% compared to 2020. In comparison with 2019, there was a small increase of €19.3 million or 1.7%. This situation is largely explained by the significant drop in fuel sales (-23% for diesel and -16% for petrol) compared to 2019, as a result of the significant use of teleworking, COVID-19 measures and an increase in fuel prices at the start of 2021.
Public debt remained stable at €17.9 billion, which corresponds to a ratio of 25.9% of gross domestic product (GDP).
"At the end of August, Luxembourg's public finances are at a much better level and I am delighted to see that the figures show that the country is well on the way to normalisation. The financial situation of the State is returning to calmer waters and I welcome this two weeks before the presentation of the draft budget for 2022. The positive development of recent months was confirmed during the summer and allows us to approach the next fiscal year with more serenity and confidence”, commented Luxembourg's Finance Minister. “The figures at the end of August confirm the soundness of the government's economic policy throughout the crisis and the flexible management of the pandemic. While welcoming the positive development of public finances, prudence must remain in order in budget execution to support the recovery in a balanced manner".