When the wishful thinking of populists collides with reality, there two problems. Often the populists will not hold them accountable and always the price is paid by those who allowed them to do their stupid things. The budget procedure for 2024 proves exactly that.
Accounts of the Ministry of Finance indicate that next year's budget may reach a record deficit of between 12 and 18 billion BGN, which is equivalent to between six and nine percent of the projected gross domestic product.
This is what Stefan Antonov commented on "Voices".
When the news about this was spread by ITN MP Stanislav Balabanov in the program “Eye to Eye“ to Tsvetanka Rizova, I thought it was about the traditional comparison of expected revenues with the amount of expenses that the ministries say they wish to make in the next year. The exact sum of everyone's unrealistic demands is presented by the finance minister and the prime minister, after which, if within a week or two, if the ministers themselves don't come up with more realistic budgets, a cut comes from the finance minister. Thus, at the end of October, we see the final draft of the budget, which is given to trade unions and employers for their opinion and is also submitted to the National Assembly.
This time, however, the problem of the finance ministry is that the deficit is formed by comparing reasonable assumptions about the expenses and the expected revenues by the experts of the finance ministry itself without taking extraordinary measures.
Inflating state salaries, inherited high pensions, municipal progress in the public investment program makes the finance ministry's task impossible to solve. An additional difficulty this year also comes from the power ministries. Traditionally, 90% of security costs are due to salary payments, and the promised increases for next year directly affect payments and the budget as a whole. A traditional breath of fresh air for the budgeters in the Ministry of Finance is the slowness in organizing public investments by the Ministry of Defense. Thus, every year, budgets save money that the Ministry of Defense has not been able to spend, but this year the procedures are proceeding at a pace that will allow close to full implementation of the planned investments in defense capacity.
For the first time, the ministry, which is always the main defender of low taxes, allows an increase in social security contributions and value added tax. In the case of VAT, the accounts are made with an increase in the rate by 2 percentage points, which, other things being equal, would bring about two billion BGN additional revenues. In the case of insurance, we are looking for such a distribution between social and health payments that the total burden will increase by about five percentage points and thus about BGN 1.2 billion additional revenues will enter the budget.
The total effect of the two measures is planned to be between three and four billion BGN, which is two percent of the projected gross domestic product and is not enough to limit the deficit within the threshold of three percent of GDP, which is required for the euro area . “
Although the news pleases the opponents of the introduction of the euro, it should worry us much more because it shows the serious threats to public finances.
The huge budget deficit, even if it could be justified by extraordinary circumstances (which there are currently none) has always been a problem. For Bulgaria, even more so considering that we already have three consecutive years with a deficit of over two percent of GDP, which at the time of their first announcement, according to preliminary data, are even above the 3 percent limit. If the primary accounts of the Ministry of Finance do not find any resolution, Bulgaria will find itself in even greater need of new loans, and not as previously thought, that in this and the next two years we will need up to BGN 35 billion.< /p>
The warnings of economists are being realized in practice, that at the moment when inflation calms down, the Ministry of Finance will find itself in a hopeless situation of searching for revenues that cannot be collected without radical measures that will shake the economy.
A solution can be sought in freezing pensions for a period of at least one year, which would mean saving funds from their possible increase later. In the case of municipalities, it is very likely that the resources to cover the investments made will prove to be insufficient and that the mayors will end up in a situation of “who rushes, he will stay”, and the others will default on their obligations for the year 2025.
It will be most dangerous if the topic of the difficult financial situation gets swept away and does not come into the light of the election campaigns. Only if this happens, the public will be able to remember that a previous caretaker finance minister – Rositsa Velkova - warned as early as last March about the dangerous trajectory on which public finances are strengthening.
The subsequent illiterate and irresponsible reaction then allowed “We Continue the Change“ to avoid the criticism they deserved. With his return to office, Finance Minister Asen Vassilev literally emptied all possible buffers that could serve this year or the next. At the end of this year, any Bulgarian government will be able, with extreme difficulty, to hide the dire situation for the last time, concluding a budget within the normal range.
However, the looming earthquake next year cannot be avoided, and therefore the parties must honestly say how they plan to prepare for the net. Even now, before the elections.