"Democratic Bulgaria" is the sponsor of two bills, the purpose of which is to curb the government from uncontrolledly raising the capital of state-owned companies and spending these funds in a non-transparent manner.
First of all, it is proposed to legally regulate a ceiling on the amount of loans granted by the state-owned Bulgarian Development Bank. This will ensure that it works specifically for the development of small and medium-sized enterprises, the SB states in the reasons for changes to the BDB Law, which reads "Sega".
They propose that the loans that the bank grants to individual or related clients should not exceed the amount of 5,000 minimum wages, and when credit lines are granted to other financial institutions, the limit should be 15,000 minimum wages. With the current minimum wage of 1,077 leva, this means a ceiling on individual loans of 5.3 million leva, and to credit institutions - 16 million leva.
There is also currently a ceiling on the loans that the state-owned BDB grants to companies. It is written into the bank's statute and is 5 million leva. The limit was introduced in 2021 after the scandalous revelations of the then Minister of Economy Kiril Petkov about huge loans with dubious collateral given to a handful of businessmen close to the government. We recall that in the period 2016-2020, the state-owned bank granted a total of 1 billion leva to eight companies, two of which did not service their loans at all.
Two years ago, the newly appointed members of the BDB's management and supervisory boards added a number of exceptions to the bank's statute for which the 5 million leva ceiling does not apply. For example, there is no ceiling for financing public enterprises and commercial companies with over 50% state or municipal participation in the implementation of regional or international projects. There is also no limit for financing beneficiaries under national programs or European programs up to the amount of their approved grant. Without a limit of 5 million leva, loans can also be granted to exporting companies, as well as to manufacturing enterprises from the military-industrial complex.
According to "Democratic Bulgaria", all these exceptions change the philosophy of the bank's existence - which is to promote small, medium and emerging businesses.
In their reasons, the DB indicated that they propose that the limits be determined based on the number of minimum wages, rather than fixed values, "in order to avoid subsequent changes in the law in the event of a change in the economic situation".
"Democratic Bulgaria" also introduces changes to the Public Enterprises Act to limit the uncontrolled pouring of huge sums into the capital of state-owned enterprises.
We recall that in August, by a decision of the Council of Ministers, the capital of the Bulgarian National Bank was increased by a colossal 4 billion leva. These funds were obtained by drawing new debt from the government, i.e. debt that will be paid by all taxpayers.
From now on, all increases in state participation in public enterprises in the amount of over 100 million leva must be voted on by the National Assembly. According to them, such huge investments imply "thoughtful, long-term policies for the development of enterprises, as well as guarantees for the effectiveness of the funds spent by the state". Therefore, the parliament's decision is also necessary.
Another of their proposals is that after each capital increase, the state-owned enterprise should publicly announce a business plan and a plan for how the investment will be implemented.
Currently, there is no information on whether and how the BDB has begun to absorb the new financial injection of 4 billion leva. There is also no breakdown in what projects this amount is to be invested.
When the Council of Ministers decided to increase the bank's capital, Finance Minister Temenuzhka Petkova outlined several priority sectors in a rather general way - construction and expansion of industrial zones, renovation of the water and sanitation infrastructure in the country, investments in the "Defense and Security" sector and in "green energy".
The spending of 1.5 billion leva, with which the capital of the Bulgarian Energy Holding was increased, will be done in the same opaque manner, again at the cost of new debt. The relevant Energy Minister Zhecho Stankov indicated a bunch of priority projects that will receive financing with this money: the hydro units of the Chaira Hydroelectric Power Plant, NEK reactors, the new units at the Kozloduy NPP, rehabilitation of the transmission networks of ESO and Bulgartransgaz. It is more than clear that 1.5 billion leva is a very small part of the necessary financing of all these projects.
Paying agent
With the 2025 budget, the BDB was chosen as the paying agent for two large-scale programs - the investment program for municipalities and the program for the energy efficiency of residential buildings. It is likely that part of the 4 billion with which the government raised the bank's capital in August, borrowing new debt, including from foreign markets, will also flow into these programs.
At its last meeting, held on October 21, the government adopted a decree authorizing the BDB to begin payments under the investment capital program for municipalities. This is happening before the complete exhaustion of the resource from the MRDPW, set in the budget for this year in the amount of 750 million leva. The State Bank was supposed to participate in the payments of the approved municipal projects with another 900 million leva of its own funds or borrowed funds.
The national program for the energy efficiency of residential buildings has earmarked 2.5 billion leva for a five-year period. They must also go through the BDB, as it was planned that the state bank would procure them by issuing bonds. Now, with the increase in the bank's capital with state loans of 4 billion leva, it is not clear whether these plans are being dropped.
Economists and financial experts have already noted that with this complex financial operation - raising the capital of several state-owned companies at the cost of new debt, without this being recorded as a budget expense - the government is circumventing the restrictions on a budget deficit of up to 3%. In practice, the cabinet is securing money for additional spending, presenting it as investments in the economy, without increasing the hole in the treasury on paper.
Therefore, the DB insists that for every large capital increase of a state-owned company - over 100 million leva - a legal analysis be published as to whether state aid is permitted by the EU. Warnings have already been heard that because of the billions poured into the capital of BDB and BEH, there is a risk of sanctions from Brussels.