site.btaUPDATED Parliament Approves at Second Reading Bill to Raise Bulgaria's Debt Ceiling by EUR 3.8 Bln

Until the adoption of the 2026 State Budget Act, the Council of Ministers may incur new state debt of up to EUR 3.8 billion to finance the budget deficit, including refinancing under Bulgaria's National Recovery and Resilience Plan, Parliament decided on Thursday by adopting at second reading amendments to the so-called budget extension law for 2026 (formally the Act on the Collection of Revenues and the Commitment of Expenditures in 2026 until the Passage of the 2026 State Budget Act, the 2026 Public Social Insurance Budget Act and the 2026 National Health Insurance Fund Budget Act).

The provision was backed by 136 MPs - Progressive Bulgaria (122) and the Movement for Rights and Freedoms (15). Voting against were 44 MPs from Democratic Bulgaria, Continue the Change, Vazrazhdane and one MP from Progressive Bulgaria. Seventeen MPs from GERB-UDF abstained.

For the purposes of cash management and payments by budget-funded organizations, the government may also incur state debt of up to EUR 3.8 billion, which must be repaid by the end of the current budget year.

According to the Council of Ministers, which submitted the bill, the amendments are intended to address gaps in the current legislation until a regular State Budget Act is adopted. The future budget law will define the specific borrowing limits for 2026, including the maximum level of state debt at year-end and the amount of new debt that may be incurred during the year, in line with the overall fiscal framework.

Parliament also authorized the Council of Ministers to negotiate and conclude, subject to subsequent ratification, a loan agreement with the European Commission worth EUR 3.2617 billion. The financing would be provided under the Security Action for Europe (SAFE) instrument aimed at strengthening the European defence industry.

In addition, Parliament approved the government's ability to incur debt under the medium-term programme for issuing debt on international markets. The maximum aggregate nominal amount of bonds that may be issued under the programme was increased from EUR 27 billion to EUR 30.8 billion.

During the debate, Democratic Bulgaria and Continue the Change accused the governing majority of seeking a "blank cheque" from Parliament without presenting detailed spending plans for the borrowing.

According to Continue the Change leader Assen Vassilev, the main problem is the lack of a clear breakdown of how the borrowed funds will be spent. He argued that borrowing EUR 3.8 billion without such information was inappropriate and maintained that the required amount was closer to EUR 2.1 billion. Vassilev also said that pensions, maternity benefits and salaries would not be endangered if the loan was not taken because these expenditures are prioritized by law. He estimated that annual interest payments on the debt could reach EUR 160 million.

Martin Dimitrov of Democratic Bulgaria said the priority should be reducing the deficit while preserving economic growth. He argued that the government had not committed itself to a deficit target for 2026 and questioned whether additional borrowing would be sought once the regular budget is adopted.

Budget Committee Chair Konstantin Prodanov of Progressive Bulgaria rejected claims that the government was seeking a blank cheque, saying the state was dealing with financial obligations inherited from previous administrations. He argued that the borrowing was needed to finance the current budget deficit and the Recovery and Resilience Plan and said the EUR 3.8 billion ceiling would provide flexibility. According to Prodanov, without new borrowing the fiscal reserve could fall below zero by August, potentially forcing the government to draw on the Silver Fund (formally known as the State Fund for Guaranteeing the Stability of the State Pension System). He noted that monthly expenditure exceeds revenue by roughly EUR 400 million on average and that August is traditionally a weak month for budget revenues.

GERB-UDF MP Vladislav Goranov said the debate would have been unnecessary had the government shown more patience during last year's budget negotiations with employers and trade unions. He questioned whether EUR 3.8 billion would be sufficient and said his parliamentary group would abstain because it was not convinced the measure would secure adequate financing.

Movement for Rights and Freedoms (MRF) Deputy Floor Leader Ayten Sabri stressed that her party supports the legislation.

Tsoncho Ganev of Vazrazhdane said the state clearly needed additional funding but criticized the government for failing to reduce spending and implement reforms.