site.btaParliamentary Forces Comment on Finance Ministry's Budget Plans

Representatives of parliamentary groups commented for BTA on the Finance Ministry’s plans for the 2023 state budget. On Tuesday, after a meeting with the parliamentary Budget and Finance Committee, Finance Minister Assen Vassilev presented to the media the progress made in the budget’s preparation.

The 2023 budget bill envisages a deficit of 4.582 billion leva - 3% of the accrued base and 2.5% of the cash base, Vassilev said. The revenue side of the budget will be BGN 69.321 billion. Bulgaria is envisaged to receive the second payment under the National Recovery and Resilience Plan within 2023. The Finance Ministry will also collect 100% dividend from state-owned companies - that is a revenue of BGN 780 million.

The draft budget will be submitted to Parliament in the first week of July so that it can be voted on by the end of July and come into force on August 1, Vassilev also said.

The opinions in Parliament were not unanimous.

Iskren Mitev MP of Continue the Change-Democratic Bulgaria commented that in the caretaker government’s 2023 budget bill, many of the expenditures were inflated and many of the revenues, deflated. The first quarter of 2023 achieved bigger revenues in GDP than expected, and that has been reflected in the regular government’s budget bill. 

According to Mitev, a large part of the promises made to certain social groups will be fulfilled with the increase in payment in various sectors under the 3% deficit. Everything promised by Finance Minister Vassilev has been reflected in the budget bill. Regarding Vassilev’s words that Bulgaria will receive a payment under the National Recovery and Resilience Plan within this year, Mitev commented that  when it comes to finance, it is good to talk after the money is already in the bank. “But since it has been publicly announced, I think that it has been taken into account that the laws necessary for this installment have happened. I expect the money to come,” the MP said.

He noted that the Finance Minister discusses with every single minister the applications of the corresponding institutions, and then he collects them in the budget.

Deyan Nikolov MP of Vazrazhdane commented that based on what Vassilev presented on Tuesday, it is evident that a deficit of 3% is possible, but the question is at what cost. “We see that around BGN 1.8 billion of capital expenditure have been cut with the claim that the cut is not at the expense of projects already in progress, and that might be an adequate approach,” Nikolov said.

In his words, Vazrazhdane finds alarming that some BGN 1.5 billion have been cut from the maintenance of state institutions with the argument that the caretaker government’s estimate had been inflated. “We are also concerned that the Minister might be looking at the revenue part through rose-tinted glasses, where he is proposing certain tax concessions to be lifted, thus expecting by some BGN 700 million more revenues from VAT and excise duties and by some BGN 500 million more from corporate tax and income tax on natural persons,” Nikolov said.

Vazrazhdane also finds alarming that through this budget the State is not investing in the economy’s development for the sole purpose of entering the euro zone. In the MP’s words, given that the international situation is relatively grave and a global financial crisis might be coming, what if it turns out that Bulgaria will join the eurozone, the deficit will be 3%, but in the end the financial crisis will come and no capital expenditures have been made to develop the economy in the medium-term (2025-2026). He is skeptical about Bulgaria getting the next payment under the National Recovery and Resilience Plan given the speed at which the National Assembly is working.

Roumen Gechev MP of BSP for Bulgaria described the regular government’s 2023 budget bill as a budget of total belt-tightening that contradicts the EU’s policy and the International Monetary Fund’s recommendations. When there are periods close to a crisis situation, in which the European economic finds itself, it is advisable to increase budget expenditure as a share of GDP, to increase capital expenditure so as to encourage the economy through public-private partnership, and that is not happening in the budget bill.  This budget is a well-executed Excel operation in which revenue and expenditure are almost equalized, the payments on the current levels are guaranteed, but these do not compensate for inflation, a further increase of incomes is not envisaged, and, most importantly, the capital expenditure have been reduced, unlike in the other EU Member States.  

According to Gechev, a budget deficit of 3% is achievable. “If you freeze payments and limit capital expenditure, there is no problem, but nowhere in the world do countries get ranked based on deficits,” he argued. The US and the United Kingdom, for example, have in the last years maintained a deficit of 8 to 12%, but they have had not serious problems because of that. This government’s problem is that instead of setting as the main goal an economic growth and an increase of the living standard, the incumbents are spinning the entire society around some number made up by them for a budget deficit of up to 3%, Gechev said. “This here is the cynicism of the eurozone countries, who are making deficits of 6, 7, 8, 12% while wagging a finger at us to stay below 3%,” the Socialist MP added.

According to Gechev, no real increase of incomes is set in this budget bill. Due to the inflation, the increase of pensions by 12% will actually result in a lower purchasing power. BSP for Bulgaria will not support this bill as it does not correspond to European policies. The concept itself for making this budget is flawed, he argued.

There Is Such a People leader Slavi Trifonov commented in a Facebook post that Vassilev’s budget is not reformist but inertial. No efforts are made for at least some reforms in the public sector: the size of the public administration, the pension model, the state enterprises, healthcare, education. The total expenditure are set at just over 40% of GDP, making this budget not very populist but still relatively populist, the post reads.

In Trifonov’s words, Vassilev lied on Tuesday when he said that expenditures have been reduced, because these are the same as in the previous state budget. The Finance Ministry wishes to compensate for the lower tax collectability and lack of reforms in the expenditure part by intending to collect 100% of state enterprises’ dividends, when that would directly affect the revenues in the country. “Another disgusting thing: Assen Vassilev is exercising brutal pressure on the leaderships and even the auditors of the Bulgarian Energy Holding to twist the accounting practices and report higher profit so as to siphon off a bigger dividend. That is pure fraud. In other words, they are trying through accounting tricks to get BGN 1.5 billion from the energy sector so that Assen Vassilev would get his 3% deficit on paper,” Trifonov wrote on Facebook. 

GERB-UDF has not made a comment yet, and the Movement for Rights and Freedoms said the party will comment on the budget bill after it is tabled in Parliament.