Bulgaria’s Cabinet approved on March 30 the draft budget revision, which sets a deficit of 2.9 per cent of target GDP and raises the annual borrowing ceiling for 2020 to 10 billion leva (about 5.11 billion euro), meant to cover increased government spending to help businesses weather the disruption caused by the State of Emergency, declared in response to the Covid-19 pandemic on March 13.
The 2020 Budget Act envisioned a balanced budget, with the annual borrowing capped at 2.2 billion leva.
In a statement, the Cabinet said that its prudent fiscal policy in recent years has allowed it to “maintain the buffers in the fiscal reserve” and said that the budget had shown a surplus at the point that the State of Emergency was declared.
The Finance Ministry is due to publish budget spending and revenue figures up to the end of February, as well as preliminary estimates for the first three months of the year, on March 31.
However, the Finance Ministry base scenario for the rest of the year envisioned a shortfall in revenue compared to the 2020 Budget Act.
“The reasons for the shortfall are complex and include internal and external factors that will contribute to reduced domestic consumption, shrinking exports and imports, lower-than-planned employment, as well as changes to the crude oil price and exchange rates,” the Cabinet said.
Under the ministry’s base scenario, the revenue shortfall would be 2.44 billion leva. The budget revision sets a new deficit target of 3.5 billion leva, or 2.9 per cent of target GDP, but the Cabinet statement did not say if that target GDP remained unchanged 2020 Budget Act macroeconomic framework.
On the spending side, the revision allocated 1.43 billion leva as a transfer from the state budget to the separate social security budget – one billion leva to cover state aid under the 60:40 scheme approved by the Cabinet earlier in the day and 430 million leva to cover the projected shortfall in the social security budget revenues.
Given the new budget deficit target and the 700 million leva cash injection in the Bulgarian Development Bank, approved by the Cabinet last week, the draft revision raised the annual borrowing ceiling to 10 billion leva for 2020, the statement said.
The budget revision requires approval by Parliament, which last week suspended all sittings except emergency ones, which may be scheduled at short notice.
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(Bulgaria’s Council of Ministers building. Photo: Clive Leviev-Sawyer)