The draft state budget for 2025 has caused a wave of negative comments. The IME team clearly pointed out that this project puts the economy under pressure and threatens the financial sustainability of the state. Unprecedentedly, the BNB also expressed a strongly critical opinion and wrote in plain text that it is against the adoption of the budget in this form.
This is stated in the weekly bulletin prepared by the IME economists. The proposed budget will still be discussed in parliament, and it remains very debatable whether there is even enough time until the end of the year for the new fiscal framework to be adopted on time. Now, however, it is worth focusing on two major themes that underpin the new budget philosophy.
The large increase in wage costs
Total wage costs in the public sector will reach 15.8 billion leva in 2025, with a growth of 2.9 billion leva. This is a 22% increase in wage costs, against the backdrop of expected inflation of 2.4% and real economic growth of 2.8%. In the period 2022-2025, the growth in wage costs in the budget will reach 64%. If wage costs represented 5.7% of GDP in 2022, then in 2025 they will reach 7.3%. Such a structural change in favor of public sector salaries, against the backdrop of a declining population and a lack of personnel in the private sector, is not only inexplicable, but unacceptable, if we adhere to the basics of economic logic.
The large increase in public sector salaries in 2025 is mainly due to the new rules for remuneration in the defense and security sector. Nearly 2.2 billion leva is spent on salary increases in defense and security alone, while another 800 million leva are for salary increases in other budget areas. Personnel costs in the Ministry of Interior increase from 2.5 billion leva to 3.8 billion leva (51% salary growth), and in the Ministry of Defense from 1.7 billion leva to 2.5 billion leva (47% growth). There is also a huge growth in smaller agencies – in the State Agency "National Security" – from 163 million BGN for personnel to 262 million BGN (61% growth), and in the State Agency "Technical Operations" – from 81 million BGN for personnel to 142 million BGN (75% growth). Such an increase in remuneration, made in one step, is simply unthinkable.
Tax Amnesty and the Role of the Bulgarian National Bank
The second major topic is the planned tax amnesty, which provides revenues of over 5 billion BGN. The budget framework actually says that in 2025 the huge increase in expenses will be met by revenues from the tax amnesty, and in 2026 and 2027 this inflation of expenses will lead to an increase in the social security burden by 5 percentage points. In this sense, the topic of tax amnesty is central to the budget - without these revenues, the entire framework collapses and the budget deficit goes far beyond the limit of 3% of GDP.
In Art. 107 of the proposed draft budget, it is written that "funds from the central budget in the amount of up to 2 billion leva may be deposited in the Bulgarian Development Bank for financing through the bank under programs and measures adopted by the Council of Ministers". This, together with some statements by the Minister of Finance, confirms that the BDB will participate in the tax amnesty process. Simply put, a state-owned bank will grant loans to companies that will pay their taxes, the state will forgive their interest (on unpaid taxes), and the companies will now have an obligation to the bank. This is a dream deal for any company that is a debtor to the treasury. Not for the taxpayers, who will in practice finance the tax amnesty - even more so if there is "hope" that the loan to the state bank will never actually be repaid.
Source: FOCUS