Bulgaria’s Cabinet approves 2026 Budget package with 5.7% deficit
Bulgaria is set to breach EU budget rules this year – by a wide margin and on purpose – after the country’s Cabinet approved on July 1 the much-delayed 2026 Budget package with a deficit target of 5.7 per cent of gross domestic product.
Last month, the European Commission already recommended opening an excessive deficit procedure against Bulgaria based on 2025 deficit data, projecting a Budget shortfall of 4.1 per cent this year.
On the same day, Finance Minister Gulub Donev painted a much darker picture, saying that would reach 7.4 per cent of GDP “without changing current policies, without taking measures to consolidate state spending”.
Opposition parties criticised Donev’s figure as alarmist and overblown, but in recent days it has emerged as the baseline against which Prime Minister Roumen Radev has juxtaposed his own government’s draft Budget.
Against renewed opposition criticism, Radev has blamed the state of public finances on policies pursued by a series of short-lived elected and caretaker governments (omitting the fact that he appointed some of them, including two caretaker administrations headed by Donev) and has sought to portray his own Budget as a consequence of those earlier policies.
“I see a pattern, those who have the largest share of the blame for this deficit and the health of public finances are the loudest [against the Budget] and are opposing their own Budget,” Radev said last week.
Given that his Progressive Bulgaria coalition has 131 MPS in the 240-seat National Assembly, Radev has no need for opposition support to pass the Budget package and has given no indication that he was willing to compromise in exchange for wider support.
The macroeconomic framework that is part of the Budget package envisions the deficit declining to 3.8 per cent of GDP in 2027 and the EU-mandated three per cent in 2028.
The Budget package envisions a consolidated fiscal programme with revenues of 49.62 billion euro, boosted by an increase in EU funds, and 56.81 billion euro in spending.
By comparison, the draft Budget put forward last year by the Rossen Zhelyazkov cabinet, which triggered wide-scale protests that brought about that government’s resignation, had revenues of 51.44 billion euro and 55.09 billion euro in spending.
The government said in a statement that it could not “effectively check” the significant rise in spending, which has grown faster than revenue so far this year.
With no 2026 Budget adopted by Parliament, Bulgaria has operated its public finances according to the provisions of the 2025, albeit with the nominal limitation that spending should not exceed the revenue collected in 2026.
This did not stop several notable planned spending increases, such as public sector salaries and pensions, from taking effect. As a result the Cabinet asked for, and the National Assembly approved, an increase in the debt ceiling by 3.8 billion euro, allowing the government to draw short-term debt to shore up Budget revenues.
Bulgaria’s government debt rose from 25 billion euro (23.8 per cent of GDP) in 2024 to 34.6 billion euro (29.9 per cent of GDP), according to the Finance Ministry’s macroeconomic framework.
It is set to increase further to 40.4 billion euro in 2026 (32.2 per cent of GDP), 45.4 billion euro in 2027 (33.8 per cent of GDP) and 51.1 billion euro (35.7 per cent of GDP) in 2028, according to the Finance Ministry.
The 2026 Budget macroeconomic framework sets an economic growth target of 2.6 per cent, slightly higher than the European Commission’s 2.5 per cent projection made in this year’s spring forecast.
The package marks only one major policy change in that it requires state employees to pay a part of their mandatory social security and health contributions (which until now have been paid by the state), but the measure will have no impact on the Budget balance, as they will be compensated with a commensurate increase in their gross salaries to prevent any loss of income.
(Bulgaria’s Cabinet building. Photo: government.bg)
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