site.btaEU Council Approves Fiscal Expenditure Path for Bulgaria

The EU Economic and Financial Affairs Council (ECOFIN) on Friday adopted recommendations endorsing the maximum net expenditure path for Bulgaria in the 2025-2028 period, as laid out in the country's National Medium-term Fiscal-structural Plan, the Council said in a press release published on its website.

Under the new economic governance framework (in force since end-April 2024), EU Member States are asked to submit national medium-term fiscal-structural plans which cover 4 to 5 years. These plans contain Member States' fiscal expenditure path, together with envisaged reforms and investments. A key objective of the plans is to ensure that, by the end of the fiscal adjustment period, general government debt is on a plausibly downward trajectory, or stays at prudent levels, and that the government deficit is brought and maintained below the reference value of 3% of GDP over the medium term.

The net expenditure paths as set by the Council constitute the most important operational indicator for fiscal surveillance at EU level. This budgetary constraint will frame Bulgaria's national fiscal policies for next four to five years and help determine whether it is on a path towards achieving or maintaining healthy finances.

On February 27, 2025, Bulgaria submitted its National Medium-term Fiscal-structural Plan to the Council of the EU and the European Commission as drawn up by the Finance Ministry. The plan, drawn up by the Finance Ministry, covers the 2025–2028 period and presents a fiscal adjustment over four years. Under the plan, Bulgaria commits to an average net expenditure growth of 4.9% over the four-year period and a net cumulative expenditure growth of 21% from the base year 2024.

The net expenditure path committed to in the plan is to lead to a structural primary balance of -1.8% of GDP at the end of the adjustment period (2028).

The net expenditure commitments will be delivered mainly through discretionary revenue-increasing measures. On the revenue side, measures to improve compliance and prevent and counter tax fraud and evasion, are amongst the main elements supporting the fiscal targets.

Additional revenue measures are expected to yield increases in social contributions, including increases in the threshold of the maximum insurable income and planned increases in the length of service for retirement.

The plan refers to planned increases in excise duties on tobacco and tobacco products. There are no significant consolidation measures on the expenditure side, while further increases are planned in line with recent trends.

If the net expenditure path committed to in the plan and the underlying assumptions
materialize, general government debt would gradually increase over the adjustment period from 24.2% in 2024 to 30.8% of GDP at the end of the adjustment period. Over the medium term, i.e. 10 years beyond the end of the adjustment period, this could imply a gradual increase in general government debt up to 45.3% in 2038.

Based on the plan's net expenditure path and assumptions, the general government deficit would be 3% in 2025 and would slightly decline to 2.9% of GDP over the adjustment period. Thus, according to the plan, the general government deficit would not exceed the 3% of GDP reference value at the end of the adjustment period (2028).

The plan describes policy intentions concerning reforms and investments to respond to the main challenges identified in the context of the European Semester, especially the country-specific recommendations, and to address the common EU priorities. The plan includes more than 120 reforms and investments addressing the common EU priorities of which more than 60 are financially supported by the Recovery and Resilience Facility (RRF) and 40 by the Cohesion policy funds (Multiannual Financial Framework).