Bulgarian Cabinet approves draft 2021 Budget bill

Bulgarian Cabinet approves draft 2021 Budget bill

Bulgaria’s Government approved the 2021 Budget bill drafted by the Finance Ministry at a Cabinet meeting on October 28, held by videoconference after Prime Minister Boiko Borissov tested positive for Covid-19 at the weekend, with several ministers self-isolating.

Speaking during the sitting, Borissov defended the bill, which has drawn criticism for increased spending. President Roumen Radev described it as “ruinous”, saying that the higher spending had no clear goals.

“We are not making an electoral Budget. This is a Budget for after the elections, so that there are people who continue to work and live in Bulgaria. Just months ago we were being accused of not giving people money. Now we have drafted programmes, secured funding through EU programmes, compensatory mechanisms and all other avenues, including tax breaks,” Borissov said.

“We are pouring money into all systems in order to overcome this terrifying pandemic and we are being accused of drafting an electoral Budget,” he said.

The 2021 Budget features a consolidated fiscal programme – which includes the state Budget, local administration budgets, healthcare and pension funds – with total revenues of 43.72 billion leva (about 22.4 billion euro) and total spending of 49.28 billion leva.

By comparison, the 2020 Budget Act initially targeted equal revenue and spending of 46.83 billion leva. The 2021 Budget bill includes a revision of this year’s targets to 40.84 billion leva in revenue and 46.02 billion leva in spending.

The 2021 Budget bill set a budget deficit target of 4.5 per cent of gross domestic product, or 5.55 billion leva, rising from this year’s revised target of 4.3 per cent, or 5.18 billion leva.

The draft Budget largely follows the trend set in recent years, with increased spending on social policies, education and healthcare, some of it labelled as measures meant to limit the impact of the Covid-19 pandemic. In total, the bill allocated 3.05 billion leva (2.45 per cent of GDP) in spending on these measures.

In the social policy area, this included raising the minimum monthly state pension to 300 leva (which will cost 474 million leva), pension bonuses for the first three months of the year (318 million leva) and expanding the government’s child benefits scheme (390 million leva).

Other major allocations included 427.5 million leva for medical staff and, separately, 157.4 million leva for front-line personnel engaged in preventing the spread of Covid-19. The draft Budget also had 77.7 million leva allocated for personal protection equipment and Covid-19 tests.

The allocation for the employment subsidy, known as the 60:40 scheme, was 300 million leva and the impact of the reduced value-added tax on certain goods and services, in effect until the end of 2021, was estimated at 234.4 million leva.

Overall, spending on social policies was set to increase to 18.19 billion leva (from 15.85 billion leva in the revised 2020 Budget Act), healthcare would receive 6.43 billion leva (up from 5.76 billion leva) and education spending would rise to 5.64 billion leva (from 4.82 billion leva).

In line with previous commitments, the minimum salary will increase to 650 leva starting January 1, but will remain unchanged in the next two years.

Economic growth in 2021 is forecast at 2.5 per cent, while this year’s GDP is expected to decline by three per cent. Both figures are more conservative compared to the European Commission’s most recent forecast, which had Bulgaria’s economy decline by 7.1 per cent this year, followed by a rebound of 5.3 per cent in 2021.

The draft budget sets the debt ceiling at 31.9 billion leva, with the government allowed to issue 4.5 billion leva in new debt in 2021. The Finance Ministry said it expected debt to be 30.1 billion leva at the end of 2020, which would represent 25.3 per cent of GDP.

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