The Ministry of Finance has published the draft law on the state budget of the Republic of Bulgaria for 2026, together with the updated medium-term budget forecast for the period 2026-2028, which serves as the explanatory memorandum to the law, Dariknews.bg reports.
The framework envisages a deficit under the consolidated fiscal program of 5.7% of gross domestic product in 2026.
The plan envisages a reduction in the deficit to 3.8% of GDP in 2027 and to 3.0% in 2028. The deficit of the “General Government" sector increases to 5.4% of GDP in 2026 and is expected to consolidate to 3.9% in 2027 and 3.3% in 2028. According to the explanatory memorandum, the framework is consistent with the European Commission's proposal to activate an excessive deficit procedure. The increase in the deficit in 2026 is mainly explained by the effect of the structural increase in previous years in public sector wage bill and social payments.
Economy and inflation
The ministry's spring macroeconomic forecast projects growth of 2.6% in 2026 and 2.5% in 2027 and 2028. Due to the military conflict in the Middle East and the blockade of the Strait of Hormuz in March, crude oil and natural gas prices increased. Average annual inflation in 2026 is expected to reach 4.3% in HICP terms, and at the end of the year consumer prices will be 5.2% higher on an annual basis, compared to 3.5% in December 2025. Average annual inflation is expected to be 3.8% in 2027, which will slow down to 2.5% in 2028.
The government debt is projected to reach 30.1% of GDP in 2026, 33.2% in 2027 and 35.2% in 2028. The minimum size of the fiscal reserve as of December 31, 2026 is set at EUR 2.6 billion.
Revenue measures
Tax rates remain unchanged. The maximum social security income is increased to 2,300 euros from 1 August 2026, and the minimum social security thresholds for certain activities and professions are increased by 5% from the same date. Vignette fees are increased by 30% from 1 August, and the excise calendar for tobacco products is accelerated, with a change in rates also from 1 August.
In the field of gambling, a licensing regime for affiliate operators and a two-component state tax on their commission remuneration are introduced — an annual fee of 6,000 euros and a variable part of 10% on the remuneration linked to results.
Expenditure measures
For 2026, a one-time indexation of 5% has been applied to individual salaries in budgetary organizations, reached as of December 31, 2025. A 10% reduction in salary costs and related social security contributions in the budgets is planned, effective from September 1, 2026 (for four months in 2026 and for the entire year for 2027-2028), without reducing the individual basic salaries reached. Municipalities, military personnel and employees under special laws (Ministry of Interior, State Security Agency, National Security Organization, intelligence, execution of sentences), delegated budget managers and medical institutions are excluded from the reduction.
The Covid supplement to newly granted pensions after July 1, 2026 is abolished. The state subsidy for religious denominations is reduced from 10.2 euros to no less than 7.7 euros per vote from October 1, and the subsidy for political parties - from 4.09 to 3.0 euros per vote from April 30. Optimization of current and capital subsidies for BDZ, NRIC, Bulgarian Posts and others is also planned.
The minimum wage is maintained at the 2026 level. The mechanism for its determination under Art. 244 of the Labor Code is being revised, and a new mechanism should be introduced in 2027.
Personal insurance for civil servants and magistrates
Civil servants under the Civil Servant Act and employees under the Judiciary Act are gradually starting to pay personal insurance contributions. From August 1, 2026, the ratio between the insurer and the insured person will be 80:20, distributed by funds. For the "Pensions" fund for those born after December 31, 1959, who are also insured in a universal pension fund, the contribution of 14.8% is distributed as 11.8% for the employer and 3% for the employee; for those born before this date, the contribution is 19.8%, divided into 15.8% and 4%.
From January 1, 2027, the ratio will reach the sizes and ratios valid for the remaining insured persons. From 2027, a similar mechanism is planned to be developed for those employed under special laws, such as the Ministry of Internal Affairs Act and the Defense and Armed Forces Act. For 2026 and 2027, compensation of remuneration is planned for these categories, in order to preserve the achieved net income.
Investments
The funds for capital expenditures in 2026 amount to 9,360.6 million euros, of which 4,028.9 million euros with national funding and 5,331.7 million euros with European funding, including under the Recovery and Resilience Plan. A total of 70,168.8 thousand euros are provided for financing measures under the Investment Promotion Act. Payments continue under the Investment Program for Municipal Projects, for which a resource of 1,108.0 million euros has been estimated in 2026.