The 2026 budget has been adopted, will be in effect for five months and already formalizes the indisputable presence of an excessive deficit.
"Focus" recalls that it took the deputies about 20 hours to get a budget for the current year, but at the end of July.
The analysis of what was adopted comes from one of the most respected Bulgarian economists - Lachezar Bogdanov from IME.
Here is the professional reading of the adopted parameters of Budget 2026:
From a macro perspective, the only unknown was the exact expected size of the deficit, and hence - the need for new debt to finance it. The political choice of the new rulers also became clear - they accused the previous governments of inheriting already incurred or agreed expenses and found the largest deficit in our history after the introduction of the currency board, instead of trying to limit spending in the middle of the current year. Perhaps this is the logical approach, since the European Commission had already requested the opening of an excessive deficit procedure against Bulgaria, and moreover, there were very few months left to change the trajectory of expenditure and revenue by the end of the year. Either way, this is the decision and now we can turn our attention to the upcoming changes and discussions on the 2027 budget.
The majority has nevertheless begun to implement some of its requests in the area of fiscal management and economic policy in general through the budget law. The formula for determining the minimum wage is being repealed. Some of the mechanisms for determining wages in the public sector were repealed, others were replaced with a new commitment to MPs' salaries, and for another group the decision was simply postponed. The commitment to minimum financing of higher education as a share of GDP is also being repealed. The scope and tax base for gambling are being expanded. The rule for calculating length of service is being changed, and it will now depend proportionally on the hours worked. Civil servants will start paying part of the social security contributions due at their own expense, and it is planned that from next year their treatment will be equalized with that of all other employees. The number of boards of public enterprises will be limited. The program for municipal investment projects is practically closed, and an order is provided for the completion of those that have already started under certain conditions, with the important clarification that capital projects that can receive European funding will not be included.
Although not exhaustive, this list reveals the intentions, approach and expected future actions of the government.
If we have to conclude, there are two reasons for optimism and three - for concern
The first is that this government, under the pressure of the high deficit and the risks of the otherwise highly unpopular drawing down of large state debts, is still acting. The second good news is that quite a few barriers considered taboo have been overcome - These are privileges or special rules that until recently it was believed that no one would ever dare to "touch". This opens the door wide for bolder actions – contrary to the spells that they are politically impossible. But here comes the first concern – there are no deeper and longer-term structural changes in this list. There are no steps towards adapting the public sector, at least to the shrinking population and the potential of new technologies, for example. Nor is there a request for a change in the financing mechanisms so as to create incentives for better results and efficiency of the affected public spheres. For all this, we will wait for the budget package in the fall, at the risk of not actually waiting for any of it.
Along with this, the feeling is accumulating that the adopted measures rather meet public expectations – often emotionally motivated – or they provide some, albeit minimal, budgetary effect, instead of seeking strategic and lasting improvement in the activities and management of various public services and the administration. Moreover, it is one thing to abolish a poorly functioning mechanism, it is quite another to invent and introduce a smart and long-term sustainable one in its place. Finally, it is worth recalling again that the government is somehow carelessly planning at least three years with high (over 3% of GDP) budget deficits assuming an extremely favorable economic situation - the highest growth in consumption and the lowest unemployment in the EU, rapid wage growth, and continuing credit expansion at a worrying pace.
The rulers do not seem to dare to think about what would happen to the budget parameters in the event of a new external shock or even if domestic demand cools down. And the completely separate issue is that so far we do not see a vision for fiscal policy that would encourage investment and technological transformation towards a more productive and globally competitive economy.