23.07.2013

The non-payment to the businesses in a timely manner under contracts and in respect of VAT refund, the transfer of payments into the next year and underfinancing of key systems is not fiscal discipline, Minister of Finance Petar Chobanov stated when presenting the 2013 budget revision parameters before the Budget and Finance Committee, the Economic Policy and Tourism Committee and the Labour and Social Policy Committee, which had a joint meeting. He added that for the period July 2009 - February 2013 the fiscal reserve dropped by BGN 4.4 billion - from BGN 8.3 billion to BGN 3.9 billion, and the net government debt increased by BGN 3.7 billion. The severe expenditure restrictions leading to objective impossibility to finance commitments made resulted in general government deficit of 4.3% of GDP at the end of 2009. According to Chobanov the revision would help to avoid the disadvantages of the financial policy implemented in that period, namely pro-cyclicality caused by irregular financing, systematic non-attainment of the revenue administrations targets and excessive pressure on compliant taxpayers, holding-up payments due by the State to the private sector, accumulation of arrears and detraction of liquidity, additional burden on the budget caused by high interest costs for delayed payments to the businesses.

The budget revision will observe the maximum government debt ceiling of BGN 14.6 billion provided for in the 2013 State Budget of the Republic of Bulgaria Law. The targeted emergency 6-month maturity issue of Government Securities (GS) to the amount of BGN 800 million in February in fact eliminated the options for flexibility to finance the budget as the ceiling on new debt in 2013 covers the gross amount of the GS to be issued (BGN 1.2 billion) and a reserve amounting to around BGN 800 million. The exhaustion of the flexibility will be compensated exactly by the change in the new debt ceiling.