22.02.2011

Today Deputy Prime Minister and Minister of Finance Simeon Djankov presented a package of measures ensuring inviolability of fiscal discipline and economic stability in the long run. The draft, provisionally entitled Financial Stability Pact, provides for limiting the redistributive role of the state to 37% of the projected GDP, guaranteeing a balanced budget stance or deficit not higher than 3% of GDP and any changes of direct taxes' rates being made only by two thirds of all members of Parliament. Mechanisms for action in emergency cases such as natural disasters and real drop in GDP under a certain critical level will be envisaged.

The Finance Minister defined limiting the public sector as the most important of the proposed measures. It will not pertain to the country's contribution to the EU general budget, expenditure on account of EU grants or the respective national co-financing. Simeon Djankov emphasized that the redistribution percentage in the past years was 41-42%, while at the moment it was between 35 and 36 percent. According to him this will provide an opportunity for implementation of active measures for developing the economy, notably in the area of infrastructure, education, labor market and culture.

To achieve a balanced budget stance depending on the economic cycle it is foreseen to set this depending on the real GDP forecast for the relevant year, Deputy Minister Vladislav Goranov said. He presented a set of rules for the above whereby there would be greater possibility for implementing counter cycle policy in the event of unfavorable economic environment.

The third measure provided for in the Financial Stability Pact envisages any change of direct taxes' rates to be made by a majority of 160 members of Parliament and after a broad public consultation.

You can download the draft Financial Stability Pact here.