site.btaGovernment to Implement Long-term Measures to Reduce Budget Deficit, Instead of Raising Taxes, Finance Minister Says

The government will not rush to implement short-term measures such as raising taxes. Instead, it will adopt a long-term approach to reducing government spending so that the budget deficit remains within the required limit, Deputy Prime Minister and Finance Minister Galab Donev said on the Panorama programme of the Bulgarian National Television.

According to Donev, the assessment of the state of public finances is realistic and is not an attempt to shift the blame to the previous administration.

“At the moment, there is no money in the state treasury,” he said, adding that this is the situation the new government has inherited.

According to him, although the economy is growing at a good pace, it cannot keep up with the growth of government spending.

“Revenues cannot catch up with expenditures. When we spend irresponsibly, this deficit occurs. And the deficit is exactly what I announced a few days ago – at 7.4% under current policies,” he said.

Donev said that when the European Commission declares that a country has an excessive deficit, it usually sets out measures that must be undertaken to reduce net spending.

According to him, unlike the European Commission’s assessment of the deficit for 2025, the Commission did not have data available when assessing the deficit for the current year, 2026.

“This is why there is a discrepancy between its estimate of a 4.1% deficit as a share of gross domestic product for 2026 and our estimate, which is realistic and based on calculations of budget revenues and a comparison with expenditures -7.4%,” he said.

Of the European Commission’s recommendation to change Bulgaria’s flat tax system, Galab Donev said that raising taxes is the easiest measure when the goal is to reduce the budget deficit.

“Let us see what other measures can be implemented so that we can achieve a sustainable reduction in state budget expenditures. Such measures do exist,” he said, noting that discussions on these measures have already begun with employers’ organizations and trade unions.

The Finance Minister said that expenditures on wages, pensions, and social benefits account for 76% of budget expenditures, while investment expenditures amount to only 24%.

“Over the past few years, wages in Bulgaria have increased by nearly 30% - the fastest growth in the European Union. Pensions have also been rising rapidly during this period, while at the same time the economy, which is growing at a more moderate pace, cannot cover this faster-growing expenditure,” he said, pointing out that this is precisely why the European Commission recommends the quickest solution to the situation in the form of tax increases.

According to Donev, however, the government can implement other, more long-term measures that would lead to a sustainable reduction in spending and thus prevent large budget deficits in the future.

“That is why we are not rushing to raise taxes. Measures will be implemented to slow the pace of growth in wages and social benefit payments,” he said, emphasizing that pensioners’ pensions will not be touched and that the most vulnerable groups will not face a freeze in their incomes.

Donev said that he would like to achieve a balanced budget for 2026, but whether this is realistic and can actually be accomplished is another question.

“We will introduce a package of measures aimed at reducing expenditures. That is why we are working on measures affecting both the expenditure and revenue sides - finding measures that increase revenues in a long-term and sustainable way, guaranteeing budget income sufficient to pay wages, pensions, and social benefits,” he said.

The finance minister added that if Bulgaria does not implement measures on its own to consolidate public finances, then at some point the European Commission will require the country to take action.