Bulgaria draft Budget banking on higher revenues to offset salary, pension hikes
Bulgaria’s Finance Ministry published the draft 2013 Budget in which it set ambitious economic growth and tax revenue targets – as it needed to in order to balance the books and compensate for a slew of salary and pension increases promised by the Cabinet.
The minimum salary in the country is set to increase to 310 leva starting January 1 2013, while pensions will increase on average by 9.3 per cent starting April 1 2013.
The draft Budget’s macroeconomic framework envisions the economy expanding by 1.9 per cent, more than what international financial institutions have been forecasting, but that is not an unusual development for the bills drafted on the watch of Finance Minister Simeon Dyankov, who has a track record of being bullish on the economy.
The bill sets a national budget revenue target of 26.9 billion leva in 2013, two billion leva higher than in this year’s Budget, with the bulk of the difference (1.77 billion leva) to be covered by higher tax revenue (targeted to reach 23.36 billion leva).
The ministry is hoping that the improved economy will come as a result of higher domestic consumption, pushing up value-added tax (VAT) receipts, and has targeted 7.9 billion leva in VAT revenue, an increase of 11 per cent over this year’s Budget target.
This alone should account for more than 44 per cent of the additional tax revenue envisioned in the bill, with the rest coming from increased excise duty revenues, higher social security and health contributions revenue, as well as income tax receipts. Corporate tax revenue is expected to remain virtually flat.
Non-tax revenue is expected to grow by about 205 million leva to 3.44 billion leva, most of the increase coming from dividends paid by state-owned companies; these are expected to rise from 191.2 million leva in this year’s Budget to 333 million leva in 2013.
On the spending side of the draft Budget, the bill set a target of 25.87 billion leva (5.8 per cent higher than this year), with the highest increase in the area of salaries and pensions. The amount spent on pensions, in particular, will increase by eight per cent to 7.9 billion leva.
Earmarks
Broken down by allocations to individual institutions, the Interior Ministry will remain the highest-spending one, with 1.12 billion leva earmarked to it, including a Budget subsidy of 1.01 billion leva. The increase, 125 million leva, will cover the higher social security contributions that the state pays on behalf of police employees.
The Defence Ministry will be the second-highest spender, with an increase of 72 million leva (taking the total to 1.05 billion leva) going to cover higher social security contributions, paid by the state on behalf of military personnel.
Other ministries will see their Budget allocations largely unchanged, while among state agencies, the country’s primary intelligence agency, the State Agency for National Security, will see its budget rise by 10 million leva (to 85 million leva), once again to cover the higher social security contributions paid by the state.
The Supreme Judicial Council, which asked for a 27 per cent increase of its budget, was denied its request and will have to make do with the same budget as this year, 400 million leva. The presidential administration, saw its funding increased by nearly 50 per cent to 6.1 million leva.
The Bulgarian Academy of Sciences will have the same budget as this year, just short of 60 million leva, and state subsidies to universities will remain unchanged at 600 million leva.
For state media, the budget of the Bulgarian National Radio will remain unchanged at 44.2 million leva, while Bulgarian National Television will receive an additional three million leva for maintenance costs, taking its budget to 77.6 million leva. State news agency BTA will see the most drastic increase, its budget increasing by half to 6.3 million leva.
Macro framework
The consolidated Budget, which is made of the national Budget plus EU funding (or the country’s annual contribution to the EU budget on the spending side) envisions total revenues of 30.55 billion leva and total spending of 31.65 billion leva. The resulting deficit of 1.1 billion leva is estimated at 1.3 per cent of projected gross domestic product (GDP), lower than the 1.7 per cent deficit target in 2012.
The Finance Ministry’s macro-economic forecast framework sees the current account deficit doubling to 1.2 billion euro (2.8 per cent of GDP), an amount covered in full by foreign direct investment projections of 1.7 billion euro (4.2 per cent of GDP).
The national debt ceiling for the end of 2013 is set at 14.6 billion leva (17.8 per cent of GDP).
(Photo: Sanja Gjenero)
