05.09.2014

"The 2014 budget revenues are overestimated from the point of view of the changed macroeconomic environment. The budget law forecast envisaged economic growth and inflation, but currently there is a deflation which has had an adverse effect on the revenue side". This is what Minister of Finance Rumen Porodzanov says in an interview for Standart Daily. According to him, in the planning itself, there is an unrealistic growth of 11% of tax revenues compared to the reports of the previous year, which is not feasible given the growth of 1.8%. Minister Porodzanov expects that the underperformance of the revenue side of the budget will be around BGN 900 million and comes mostly from the parameters of the Customs Agency. He is certain that the Agency makes tremendous efforts to reduce this underperformance.

Minister Porodzanov sees the suspended funds under OP Environment and two of the axes of OP Regional Development as a material problem for budget execution. He notes that the decision to continue with project financing despite the temporary non-reimbursement of EU funds would form a provisional deficit of BGN 700-900 million. "Should we not do this, there will be non-performance of projects, loss of EU funds and contractual commitments on account of the state in the following years", says the Minister. He assures that the Government makes efforts to resume EU payments.

Concerning the proposal of the Caretaker Government for budget revision, Minister Porodzanov says that by the end of this month there will be an assessment of the measures taken so as to estimate the reduction in the revenue side of the budget. According to him, the initial estimate of the drop in revenue will be further reduced. "With unrealistic revenues, the great responsibility lies with reasonable expenditures", he comments and adds that the deficit figures they will propose to the National Assembly will vary between 2.6% and 2.8% on a cash basis. The Minister of Finance announces that the 2015 forecast will include parameters based on the revised 2014 budget. For this purpose, the CFP balance will be within 2% of GDP in accordance with the fiscal rule of the Public Finance Law. The expectations for this year are that the growth of 1.8% of GDP will not be achieved but it will rather be around 1.5-1.6%, according to Minister Porodzanov who also adds that the deflation is another reason for this.

The Finance Minister points out that one of the topics discussed with the delegation of the European Commission is also connected to the frozen funds of CCB and the possibility for depositors to get partial access to their deposits as a result of the longer period of special surveillance. "We are talking about partial access through the Bank's current liquidity. The solution of this case lies entirely with the BNB", he considers. The Minister is of the opinion that, in the interest of public finance, the Bank should be rehabilitated with minimum or without any budget participation.

Asked about the possibility for municipalities with CCB blocked funds to be granted interest-free loans from the budget, Mr. Porodzanov says that several such requests have been received which are being analysed. He also answers that as to municipal needs for resources, including EU projects, the budget provides an option for an interest-free loan by the end of the year.