18.02.2015

"When we entered our offices on 7 November, our first expected task was to ensure the financial stability of the 2014 budget and to allow Bulgaria to start 2015 with an approved state budget law, which we undoubtedly achieved". This is what Minister of Finance Vladislav Goranov said at a briefing on the occasion of the hundred days of the Government. He reminded that at the very beginning of being in power the greatest challenge from the point of view of public significance and justice was to ensure public ease, predictability and as quick access as possible to the deposits of the Bulgarian citizens blocked in the bank with a subsequently withdrawn license. As a result of the quick steps of providing liquidity, Mr. Goranov added, from 4 December 2014 to 13 February 2015 100,950 depositors disposed with their guaranteed deposits of BGN 3.478 billion.  "We report as successful the accelerated recovery of the predictability and stability of the state's financial system", the Finance Minister was explicit.

Minister Goranov also commented the 2014 budget execution, saying that revenue underperformance exceeded even the most pessimistic expectations.  "All in all, however, last year ended with resumed payments under most of the EU funds and pre-financing of delayed payments to the businesses related to EU funds management". "We continued the good practice of accelerated VAT refund and non-retention of non-refunded tax credits introduced by the previous government. The non-refunded tax credits at end-2014 are six times lower than those at end-2008, which reported enormous fiscal surplus, amounting to almost BGN 105 million, given that they were BGN 240 million at the start of the year", he said. The Minister highlighted that in a period of shrunk consumption and deflation pressure, this policy was beneficial for the business as it lifted the liquidity pressure off it on account of the budget. He assured that the Ministry of Finance would continue working towards as quick settlement as possible of the state's liabilities to the private business.

"Together with the parters supporting the Government and within the Government we managed to make a conservative and sustainable fiscal framework for the 2015 budget, making the first step towards getting the fiscal stance back to the normal standards of both the EU and Bulgaria where our European partners are accustomed to see us", Mr. Goranov pointed out. He also announced that the course of budget execution and the measures taken to improve collection gave grounds to consider that this year no fiscal risks were expected. "Of course it is still too early but all the data show that grey economy reserves and the Government's decisive efforts to reduce the attempts for revenue side abuse are effective, i.e. for the first time since January 2009 there is a budget surplus in the first month of 2015", he said.

Minister Goranov also said it was good news that the quick recovery in the predictable public finance management eased the markets and the yield of the benchmark bonds issued last year dropped by around 20% compared to November 2014. "This means that the market rates us well and the merits go to the entire Government", he is convinced. The Minister of Finance assured that the efforts for improving revenue collection to guarantee budget sustainability and improve the efficiency of the expenditure side would continue. "Because you see how hot the deficit discussion gets when it has to be covered. In the absence of other instruments for deficit financing, the decision is assumption of debt", Mr. Goranov backed himself. According to him, the resulting public debate was important because all political parties were convinced that budget deficits should not be easily incurred as this price was paid by all of us, the budget deficit was a problem for the whole society as it is financed by debt which binds the next generations.

As to the debt instrument proposed by MoF, the Finance Minister laid emphasis on the following: "When we know that every year from now on we will be having e a budget deficit and huge debt maturities, it is obligatory to have a vision of how we will be covering these". According to him, in case of a political collapse and no parliament, there was a real risk for getting into a situation in which we would not be able to finance our current liabilities. "This risk is managed in the manner I have proposed, i.e. by concluding a framework agreement with partner banks, which enables, depending on the debt limits for each of the years until 2017, the assumption of such debt. Those EUR 8 billion may be reduced to 6, if we balance the budget for 2015, 2016 and 2017, and Bulgaria's Finance Minister will be the first to insist on that", he said. According to the Minister, it would be wrong to leave the state unable to pay the liabilities already taken that would mature in the next two years, and it would be honest and responsible to present this account to the society and to have this debate. Minister Goranov underlined that the dealership agreement with four banks did not legally bind our country to assume debt as "if Bulgaria could find another financial resource, it is possible for it not to issue a single euro", he added.   

Minister Goranov said in conclusion that if we did not want debts, we should not have deficits. "If we do not want deficits, we should either spend less or increase the tax burden. The second is something that I, as finance minister, do not support. We have reserves in the revenue side and we will make every effort and employ all instruments available to collect what is due. We probably have reserves in the expenditure side, too, and it is a priority of any of the other ministers to make the necessary reforms so that we have the revenue and expenditure side of the Bulgarian budget getting as close and fast as possible".