Bulgaria think-tank presents leaner ‘alternative Budget’

Written by on November 5, 2013 in Bulgaria - No comments

Sofia-based think-tank Institute for Market Economics (IME) presented on November 5 its annual “alternative Budget” – a leaner bill with lower Government spending and no deficit spending – that has become a traditional staple of the annual Budget proceedings.

The proposals made by IME are a familiar lot, one that current Prime Minister Plamen Oresharski will have recognised from the time when he was in charge of drafting the Budget bill, as the finance minister in the previous socialist administration, between 2005 and 2009.

These include a 10 per cent cut in the payroll and current spending of the public administration, cutting Budget subsidies (notably to farmers and indebted state enterprises), as well as abolishing several taxes that the think-tank sees as inefficient and further compounding the burden on taxpayers – taxes on dividend (now at five per cent) and deposit interest (10 per cent) among them.

Other proposals include removing tax breaks in certain areas, like the lower value-added tax on tourist services, in the agriculture sector and food vouchers.

Equally familiar are IME’s proposals for pension and health care reform – allowing people to pay some of their pension contribution (two percentage points of the gross salary) to private pension funds and revoking the monopoly of the National Health Insurance Fund and allowing people to pay up to two per cent of their salary (a quarter of the monthly mandatory health care contribution) to private health care insurers.

What sets this year’s “alternative Budget” apart from its predecessors is the recognition that Bulgaria is facing a political crisis that could continue into, and even deepen, in 2014. By pursuing a balanced Budget, with no deficit spending, the Cabinet would make public finances less dependent on the outcome of the current crisis, as well giving taxpayers wider choices as to where their money is going (in the pension and health care systems), as well as spurring economic recovery (the Government’s 1.8 per cent economic growth target is described as “possible, but difficult to achieve” because it does not take into account the political risks and the prospect of a continued recession in the euro zone.)

IME’s draft envisions lower Budget revenues at 29.9 billion leva, rather than the Finance Ministry’s 30.9 billion leva, mainly from the reduced pension and health care payments. On the spending side, the think-tank’s proposal is to cut government expenditures by about 2.5 billion leva (from 32.36 billion leva to 28.84 billion leva), resulting in zero deficit. The 2014 Budget bill targets 1.8 per cent deficit.

(Photo: Miroslav Sárička)

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