Bulgaria faces more debt as fiscal reserve insufficient to cover deficit – report

Bulgaria faces more debt as fiscal reserve insufficient to cover deficit – report

By Clive Leviev-Sawyer of the Sofia Globe

Bulgaria’s new government, which will take office after the early parliamentary elections on October 5, may face little choice and be forced to borrow more money to cover the Budget deficit, because of the limited amount of discretionary funds available in the fiscal reserve, daily newspaper Sega said on September 15.

The newspaper put the size of the fiscal reserve at 7.8 billion leva (about four billion euro) at the end of August, without taking into account the EU funds Bulgaria has been allocated but are yet to be transferred – official figures for August from the Finance Ministry are due at the end of September, but an earlier statement put the size of the fiscal reserve at 8.3 billion leva at the end of July.

According to Sega’s report, the bulk of the money in the fiscal reserve are funds with a clear designated purpose – including 2.4 billion leva in the state deposit guarantee fund, 1.6 billion leva that will be used to pay foreign debt due in January 2015, as well as 1.2 billion leva deposited in the First Investment Bank as part of an EU-approved bank liquidity support scheme.

In total, about 6.8 billion leva in the reserve had a designated purpose; part of the remaining one billion leva was also designated for nuclear reactor decommissioning and radioactive waste storage, although the Finance Ministry did not clarify the amount, the newspaper said.

With less than one billion leva available in the fiscal reserve and 500 million leva left to reach the annual borrowing ceiling specified in the Budget Act, Bulgaria’s next government could have insufficient funds to cover the Budget deficit, Sega said.

The deficit target in the Budget Act is 1.4 billion leva, but sluggish revenue collection and the partial freeze on EU funding imposed during the term of the now-departed Plamen Oresharski administration have pushed the deficit figure to 1.15 billion leva for the first seven months of the year.

The caretaker cabinet has said that it is already working on a Budget revision bill – after the ruling axis in the previous legislature rejected a proposal put forth by the Oresharski cabinet – that will be submitted to the next Parliament. The Finance Ministry has said that in its bill the deficit would not exceed the three per cent of gross domestic product threshold that would trigger the excessive deficit proceedings by the European Commission.

Despite the implausible reassurances from the parties in the former ruling axis that the Budget deficit was not at risk, the prevailing sentiment is that Bulgaria might have to take the plunge and exceed the EU-mandated deficit threshold in 2014 and focus on consolidating public finances next year, Sega said.

(Bulgaria caretaker Finance Minister Roumen Porozhanov. Photo: government.bg)