Bulgaria’s Finance Ministry published the 2014 draft Budget bill on October 23, targeting higher economic growth through increased deficit spending. Bulgaria is also set to borrow heavily next year, but the bulk of it will be to refinance old debt.
The consolidated fiscal programme, which includes the state Budget, local administration budgets, healthcare and pension funds, envisions total revenues of 30.89 billion leva, an increase of 501 million leva compared to this year. Total spending will increase by 380 million leva, to 32.36 billion leva.
Speaking after the weekly Cabinet meeting, Finance Minister Petar Chobanov said that the revenue target was high, but added that it was doable with upcoming legislative changes and if revenue collection agencies improved their work.
The draft budget raises the debt ceiling to 18 billion leva, or 3.4 billion leva higher than in 2013. At the same time, the government is allowed to issue up to 4.4 billion leva in new debt.
A big part of the new debt will be taken on to pay back 1.7 billion leva worth of dollar-denominated bonds issued in 2002, which are due at the start of 2015, Chobanov said.
The rest of the new debt will be used to finance the budget deficit, which is targeted at 1.8 per cent of gross domestic growth (GDP), he said.
Economic growth is forecast at 1.8 per cent, banking on favourable developments in the European Union, which is Bulgaria’s main trading partner, and an increase in household demand domestically.
Despite increased deficit spending, Chobanov said that most ministries will have to do with less money than in previous years, as their funding allocations are set to be cut. He said that the practice to increase ministry allocations every year, as was done during the centre-right government of GERB, would come to an end.
At the same time, state bodies will be required to streamline their operations as part of the government’s efforts to cut down the size of the civil service, Chobanov said, but gave no details about the exact number of redundancies.
Spending on education, pensions and social benefits will increase next year. Additionally, the Government will allocate 500 million leva to a new regional development programme, which will finance “public investment projects on a competitive basis”, but it remains unclear how exactly this new funding mechanism would work.
(Finance Minister Petar Chobanov. Photo: minfin.bg)