The Fiscal Council of Bulgaria proposes to revise the draft State Budget Law of the Republic of Bulgaria for 2026 and the draft Updated Medium-Term Budget Forecast for the period 2026-2028. This is indicated by the opinion of the Fiscal Council on the revised Draft State Budget Law of Bulgaria for 2026, which was approved by the Budget and Finance Committee of the Parliament earlier this week. The institution's opinion comes after Prime Minister Rosen Zhelyazkov announced yesterday that the government is resigning as a result of the protests across the country, and today the parliament unanimously accepted it.
The Fiscal Council points out in its opinion similar recommendations and conclusions to those that were prepared regarding the withdrawn draft budget for next year. According to the institution, the revenues set in the budget are overestimated, and regarding the expenditure part, the automatic indexations for salaries in some sectors, which lead to a budget imbalance, should be eliminated. It is recommended to change the approach to budget preparation so as to emphasize the efficiency and quality of public finances.
According to the opinion, a more significant effort is needed to create cyclical buffers exceeding the regulatory requirement of 1.5 percent of gross domestic product (GDP), as well as the creation of a structural buffer to provide more significant fiscal space for structural reforms.
The rule for the size of the public sector to 40 percent of GDP was violated in 2026 and remains so in the following years.
The Fiscal Council believes that the revenue projections in the draft budget are overestimated, with the institution's assessment indicating a risk of tax revenue shortfall of 3.5 to 4.7 billion euros, depending on the assumptions for the development of the GDP structure.
The expansion of government spending in 2026 in the amount of about 5 percent of GDP leads to a change in the public/private sector ratio and a continuation of the increase in its share, despite the very good development of the economy.
The Fiscal Council recommends that all numerical rules leading to procyclicality of expenditures be abolished.
According to the opinion, the amount of consolidated public debt is growing at a worrying pace – it has increased to 29 percent of GDP this year and reached 37 percent of GDP at the end of the period under review. Interest expenses are also growing – from 0.5 billion euros in 2024 to 1.8 billion euros in 2028. The sharp increase in the debt burden will lead to an increase in the cost of debt financing on international markets, and at this rate Bulgaria is on the verge of losing the image of a country with low fiscal risk in terms of its indebtedness, the Fiscal Council states.
The institution warns that the continued policy of deducting 100 percent of dividends from state-owned enterprises in the medium term will lead to their decapitalization, inability to develop and maintain competitiveness.
Earlier today, the Fiscal Council published an analysis dedicated to the procedures and texts in the law affecting the country's possible entry into the new year 2026 without an adopted State Budget Law.