site.btaInstitute for Market Economics Warns Planned Expenditure in the 2026 Draft Budget Could Lead to Crisis, Large Deficit, Rising Debt

The Institute for Market Economics (IME) presented an alternative state budget for 2026 during a discussion titled “Alternative Budget 2026: Reforms for Growth, Investment and Fiscal Consolidation!” in Sofia on Wednesday. Their proposals include limiting the redistribution of national funds through the budget to 38% of gross domestic product (GDP) and keeping the tax burden on labour and profits.

Since 2002, IME has prepared an annual alternative budget with proposals for measures and ideas for reforms.

Noting that the 2026 draft state budget includes planned expenditure of over 45% of GDP, IME Senior Research Fellow Petar Ganev commented that fiscal policy over the past two decades shows that when expenditure goes above the threshold of 40% of GDP, the country faces a large deficit and rising debt. He added that when it comes to expenditure amounting to 45% and more of GDP, this means a potential budget crisis and a worsening trajectory of public finances.

With an amendment to the Public Finances Act, national expenditure of up to 38% of GDP should be written into the consolidated fiscal programme, which automatically means a balanced budget without touching taxes, Ganev pointed out. He added that this direction means limiting public debt to 30% of GDP in the medium term and avoiding a “Romania” scenario, which already has 60%, as well as ensuring financial stability.

IME also proposes keeping the tax and social-security burden unchanged in 2026 and the possibility of reducing social-security contributions in 2027 and 2028. "We believe that this continues to be a policy that can lead to more incentives to work, bringing parts of the economy out of the shadows and achieving higher growth," Ganev said.

Another measure proposed by IME is a tax incentive for innovation and investment through accelerated depreciation for expenditure on machinery and equipment and recognizing research and development costs at double their amount.

Other proposals from IME’s alternative budget are related to public investment and the participation of the private sector in large public projects, social assistance and restricting ineffective programmes and subsidies, opportunities for development at the local level, and healthcare expenditure by introducing strict limits on the growth of such spending.