State spending is growing faster than revenues and is pushing out the budget deficit – this conclusion was agreed upon by the participants in the round table “Bulgaria's Fiscal Policy and the Sustainable Economic Vision of the Country with Entry into the Eurozone“. The event, organized by the Bulgarian Employers' Association for Innovative Technologies (BRAIT) and the Institute for Market Economics (IME), brought together representatives of high-tech companies, industry organizations, economic experts and financial analysts. Nearly 15 speakers participated in the discussion, including Lyubomir Karimanski, member of the BNB Board of Directors, Yordan Ginev, Chairman of AIBEST, Dobroslav Dimitrov, Chairman of BASCOM and member of the BRAIT Board of Directors, Alexander Nutsov, Head of “Policies and Strategic Planning“ of BESCO, Ivan Mihaylov, CEO of the American Chamber of Commerce, Assoc. Prof. Krasen Stanchev, Chairman of the IME Board of Directors, Georgi Angelov, Senior Economist at the “Open Society Institute“ and others, which made it one of the most significant expert events on the topic this year.
Expenditures Exceed Revenues - a Risk to Budget Stability
The IME presented an analysis according to which it is the sharp increase in public spending that is the leading factor for the growing budget deficit, despite the good dynamics of revenues and increased collection. Historically, government spending has maintained a level of around 37% of GDP, with 40% being an unspoken upper limit. In 2025, it will reach 42.4%, and for 2026, growth to 45% of GDP is planned - a trajectory that creates a risk of future tax increases and fiscal instability.
„Bulgarian business is ready to participate in decisions, but without reforms and a predictable framework, it is difficult to maintain an investment horizon. The state must show a vision for controlling spending, otherwise we will continue to operate in an environment of uncertainty. That is why we insist on an open and expert dialogue that will lead to effective, not short-term solutions“, emphasized Iliya Krastev, Chairman of the Board of BRAIT.
Reforms instead of mechanical adjustments
The path to maintaining and even reducing the tax burden goes through structural reforms aimed at accelerating economic growth and improving the investment climate, as well as increasing the efficiency of the public sector.
The participants in the round table united around the understanding that sustainable fiscal policy cannot be achieved through mechanical adjustments in the revenue side, but through consistent structural reforms. According to experts, the Bulgarian economy has real potential for higher productivity and investment, but in order to use it, it is necessary to stimulate innovation and modernize the public sector.
Among the solutions discussed were more modern tax instruments that encourage investment – including rapid depreciation and double recognition of R&D costs. Increased private investment in infrastructure through concessions and public-private partnerships was also supported, which would free up significant fiscal resources.
In the public sector, it was emphasized that while the population is decreasing, administrative costs and the general fund "Wages" continue to grow. Participants noted the need for reforms, including the elimination of automatic mechanisms tied to the dynamics of the average wage, as well as a functional analysis to outline opportunities for optimization.
In the health sector, experts noted significant potential for increasing efficiency. The need to restructure the hospital network, improve the financing model and focus more on prevention and outpatient care was commented on.
„Higher collection is a positive signal, but cannot compensate for the trend towards a systematic expansion of costs. Without structural reforms, any budget framework will remain vulnerable – even with good revenues. We need to talk about the efficiency of public systems, not about the mechanical redistribution of more funds,” said Lachezar Bogdanov, Chief Economist at IME.
The discussion also raised broader systemic issues related to the quality of public finances and the investment environment. “The efficient allocation of public resources is a fundamental principle – fiscal rules must be respected, not interpreted according to the moment”, emphasized Lyubomir Karimanski, Member of the Governing Board of the BNB.
Business representatives emphasized the need for a predictable framework for decision-making. “The unpredictability of the political process and the frequent change of positions on key financial issues directly hinder investments”, said Yordan Ginev, Chairman of AIBEST. Ivan Mihaylov, CEO of the American Chamber of Commerce, added: “There is a lack of a sustainable vision for where Bulgaria is developing – business is already feeling the weight of this inconsistency.“
Dobroslav Dimitrov, member of the Board of Directors of BRAITH and Chairman of BASCOM, emphasized the long-term challenges: “Demography and the gray sector are systematically undermining the revenue base. This is a topic that affects every citizen, but without reforms here we cannot achieve better collection rates. Political courage is needed in these conversations”.
Analysis of the challenges in the 2026 Budget draft
The experts pointed out that at present the revised 2026 budget draft does not offer a comprehensive vision for containing spending pressures. Emphasis was placed on several key shortcomings:
The automatic mechanisms for increasing spending have not been removed or reformed, but only frozen for 2026, which leaves the systemic problem unresolved;
The planned cuts in the vacant posts in the administration were defined as a positive, but too limited and slow step; the budget lacks measures to increase the efficiency of spending in key systems such as healthcare, social services, administration and the “Internal Order and Security“ sector.
Despite the adjustments, the budget continues to be expenditure-oriented and does not present a clear roadmap for increasing the efficiency in key systems such as healthcare, social services and public administration.
In the event of failure to adopt the budget for next year, the state will operate under an extension law, which creates additional uncertainty for the business environment and investment planning. Participants stressed the need for a stable governance framework and consistent policies to provide predictability to the economy.