I understand that our decision to present the new budget clearly, transparently and in detail at Bulgaria’s largest economics university, instead of behind closed doors and hidden from the public at a lectern in the ministry or under the lights of the Granite Hall, is scandalous and unforgivable. Still, there are other topics it would be good to discuss – such as the three audit reports by the Bulgarian National Audit Office published at the beginning of this week. A few media outlets nevertheless reported objectively on the truths set out in them – namely, that Bulgaria has structural problems with its public finances. And these problems arose from budget decisions made between 2020 and mid-2026.
This was written on "Facebook" by Deputy Prime Minister Atanas Pekanov.
As Mediapool writes: „The main conclusion from the audits is very simple – the unleashing of social spending and public-sector wages over the past six years cannot be paid for with current taxes. All these expenditures have been rising steadily every year like a snowball, while taxes have remained more or less the same as a share of GDP (around 30%).“
Just a few important facts. During this period, personnel costs increased by 114% – from BGN 11.37 billion to BGN 24.3 billion, or by nearly BGN 13 billion. The pace of their increase outstripped that of tax revenues by 25.3 percentage points, as well as that of economic growth. More than 90% of the increase in 2025 was concentrated among just 11 of the 45 budget spending units, with around 60% of this growth occurring in the „Defence and Security“ sector. A key factor is the mechanisms for automatic increases in remuneration, which turn these costs into a permanent commitment.
At the same time, a number of tax decisions taken by governments during these years restricted revenues. Reduced VAT rates cost the budget BGN 1.48 billion, while raising the VAT registration threshold cost BGN 1.42 billion. The overall cumulative effect of the measures analysed on tax and social-security revenues was just BGN 44.9 million in a positive direction. In other words – not much has been done to put the state on a more stable footing.
The expenditure side is also increasingly burdened by the transfer to cover the deficit in the state public insurance system. The NSSI’s expenditures increased by 91% – from BGN 14.28 billion to BGN 27.28 billion. Revenue from social-security contributions covers just 54.9% of expenditure, compared with 59.9% in 2020. Dependence on the state budget exceeds BGN 12 billion annually. The audit shows that, in parallel, the link between insurance contributions and pensions is weakening.
At the same time, in order to make promises for the future, the governments that voted on the budgets during this period set out investment programmes without sufficient financial coverage. In 2024, projected expenditure under the national and municipal investment programmes exceeded the overall capital expenditure limit by more than 32%. In 2025, the municipal programme was again insufficiently funded. This creates commitments that are passed on to subsequent budgets. The budget of the Road Infrastructure Agency is particularly problematic. The agency delayed, sometimes for years, the final approval of activities that had already been carried out, linking it to the availability of budget funds. As a result, the expenditures were not accounted for in a timely manner, while the actual liabilities remained outside the reports.
The result is a lasting structural deficit, which deepened from 2.6% to 4.1% of GDP between 2020 and 2025. Permanent expenditures established by law are growing faster than sustainable revenues. Government debt is becoming a mechanism for covering current budget needs. An income and social policy is being pursued – there is nothing wrong with that, but it is not backed by any form of funding. It is like having lunch at the ministerial canteen and then leaving office without paying the bill.
This bill will have to be paid at some point – through a higher deficit and debt, cuts in expenditure or higher taxes. These are objective truths, repeated over the years, sometimes timidly and sometimes more forcefully, by a number of experts. Many of them now seem to have forgotten them out of fear of the communism that is supposedly approaching, or whatever the daily hysteria against the government happens to be.
These are structural problems that have accumulated over years. The solutions are not easy – some of the measures that have led to growing imbalances in social payments, for example, are being implemented in response to European recommendations for improving social protection, while others are part of national policies to reduce poverty and support vulnerable groups. That is why, in the 2027 budget, which we will present tomorrow, we have provided for both measures aimed at fiscal consolidation and a substantial social package.