When budget expenditures exceed revenues, this is called a budget deficit. You have to cover this difference - how do you cover it? With loans. This was commented on by senior economist from the Institute for Market Economics Lachezar Bogdanov in the program “Interview in NOVA News”. According to him, accumulating a deficit is dangerous because “people often say: but we don't want loans that then have to be returned and for which more and more taxes will be paid”.
Bogdanov explained that despite the good growth in tax revenues, Bulgaria is in a paradoxical situation. “The economy is working, tax revenues are growing. But why is there a growing deficit? Because expenses are growing at an even faster pace”, the economist commented.
He stressed that drastic cuts in funds are not yet necessary: “We are not yet in the situation where expenses need to be cut. We are in a situation where even if expenses stop growing from tomorrow onwards, we will actually have a pretty good financial result”.
The economist outlined several steps to stabilize public finances:
Personnel optimization: “We cannot have a public sector that has remained intact for the last 15 years, while the population has decreased by 20%. This is clearly unsustainable”, commented Bogdanov.
Wage reform: “An important principled approach is to remove these automatic wage increases in the public sector”, the economist is categorical.
Merging of structures: Bogdanov called for a much more comprehensive approach to merging ministries and agencies, so as not to duplicate administration and building stock.
According to the economist, postponing these steps leads to the inevitable debt crisis. He gave the example of Greece and Hungary, where after a delay, severe measures followed - very sharp tax increases, freezing of wages and pensions, even cutting salaries. “The sooner the thought and action on budget consolidation begin, the less painful it will be”, he concluded.