Bulgaria’s Government approved the 2022 Budget bill drafted by the Finance Ministry at a Cabinet sitting on January 31, held by videoconference after Finance Minister Assen Vassilev tested positive for Covid-19 last week.
Owing to three parliamentary elections in 2021 and two short-lived parliaments that failed to elect a government, it was not until December 13 that Prime Minister Kiril Petkov’s Cabinet took office, leaving it no time to put forward a 2022 Budget bill before the end of last year.
Earlier in January, the National Assembly approved a bill extending the duration of the provisions of the 2021 Budget Act until March 31 2022.
Speaking to reporters after the Cabinet sitting, Petkov described the bill as “a Budget of growth”, as government investment is set to double to 5.8 per cent of gross domestic product (GDP), from 2.9 per cent in 2021.
A total of 8.2 billion leva, or about 4.2 billion euro, was earmarked for capital investment, Petkov said, to be funded by deficit spending.
The deficit target was 4.1 per cent of GDP, in part due to the government spending on measures meant to counter the economic impact of the coronavirus pandemic, Petkov said. Without the cost of those measures, the deficit would be 2.5 per cent of GDP, he said.
In nominal terms, that was a deficit of 5.9 billion leva, according to the draft bill published by the Finance Ministry earlier in January.
The ministry’s bill envisions a consolidated fiscal programme – which includes the state Budget, local administration budgets, healthcare and pension funds – with total revenues of 57.25 billion leva and total spending of 63.15 billion leva.
By comparison, the 2021 consolidated fiscal programme is expected to reach 52.34 billion leva in total revenues and 56.25 billion leva in spending, with the 3.91 billion leva deficit being the equivalent of three per cent of GDP.
The 2022 Budget will be revised mid-year, Vassilev said earlier this month, since the draft bill included only a small part of the public policies agreed during the talks to form the current government coalition.
Even in its current form, the bill envisions an increase in spending in several areas – spending on social security and pensions was set to rise to 20.76 billion leva (up from 19.27 in the revised 2021 Budget), education would receive 6.41 billion leva (up from 5.67 billion leva) and healthcare spending was set to reach 8.34 billion leva (up from 7.04 billion leva.)
As regards the spending on Covid-19 measures, the draft bill split the 2.27 billion leva earmarked for those purposes into three main groups: measures to support households (817.5 million leva), measures to support businesses (853.2 million leva) and measures to support state institutions (597.9 million leva).
The single largest items were the allocations to purchase vaccines, medicines and Covid-19 tests (416.4 million leva), wage-support measures (400 million leva) and money for first-line personnel (378 million leva).
In a departure from the 2021 Budget, which envisioned no increase in the minimum salary in 2022 and 2023, the bill is set to increase the minimum salary to 710 leva from 650 leva, starting April 1.
The proposal has angered employer groups and led to sharp exchanges with Vassilev last week, at a sitting of the consultative council that brings together representatives of the government, employer associations and trade unions.
Economic growth in 2022 is forecast at 4.8 per cent, while the 2021 GDP is expected to rise by 3.7 per cent. The European Commission’s most recent forecast in autumn projected Bulgaria’s economy growing by 4.1 per cent in 2022 after 3.8 per cent in 2021.
The draft budget sets the debt ceiling at 35.5 billion leva, or 24.8 per cent of projected GDP, with the government allowed to issue 7.3 billion leva in new debt in 2022. The Finance Ministry said government debt was 31.2 billion leva at the end of 2021.
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