08.01.2016

„In few days we will publish for public consultation the MF's draft amendments to the Public Finance Law related to the introduction of a new mechanism for municipalities' financial recovery", Minister of Finance Vladislav Goranov said in his first interview for the new year 2016 broadcasted by Bg ON AIR and Bloomberg TV. This is a mechanism for early warning that the finances of a certain municipality are not in a good position and through it the local community will be informed about the problems. We will propose provisions in the Law on the procedure of searching and finding solutions for municipalities' financial recovery, as well as on the role of the state and the Finance Minister in the process. The draft will be discussed with the National Association of Municipalities (NAMB), the Council for decentralization of government and the stakeholders, the Finance Minister announced.

We plan this mechanism to be applied when, on the basis of objective indicators that the Ministry of Finance will monitor, a municipality is reported to have financial difficulties. There will be a legal obligation for any mayor in such situation to propose to the municipal council a plan for recovery of the finances of the municipality. "The local government by its own efforts and resources will begin to implement this plan, which will aim to return the financial position of the municipality within normal limits, but if it cannot cope by itself and requests assistance from the state, then the government will have to give opinion on the plan, will monitor its implementation and will possibly decide to provide interest-free funds, which consequently may, under certain circumstances, turn into grant", Goranov explained the concept. The Ministry of Finance and the Council of Ministers will play much bigger supervisory role as regards the way the recovery plan is implemented and the tranches of financial assistance from the state will be provided depending on its implementation. The Minister of Finance is to give an opinion on the draft budget proposed by the mayor of any municipality with financial difficulties which must be discussed in the municipal council in order not to violate the principles of decentralization and independence of local authorities.

Minister Goranov commented that over the years the Ministry of Finance had seen a trend the mayors to wrongly plan municipal revenue in their desire to make more expenses under their budgets, which was a prerequisite for accumulating a lot of liabilities. "Poor planning is not politically coloured. There are examples of such mayors from all colours of the political spectrum", the Minister said. With the amendments to the Public Finance Law the Ministry of Finance plans to provide public information about all municipalities under clearly regulated indicators that will be monitored in connection with the financial position of the local government.  

The Minister also said that he would wait for the new Board of Directors of NAMB and at his first meeting with the Directors he would raise the issue of the possibility the municipalities to collect up to 2% additional personal income tax. If the Ministry of Finance obtains support for this idea, it will again be tabled for debate which was suspended last year because of local elections. The Finance Minister reiterated his belief that the revenue base wherewith municipalities worked and the collection which they achieved at the current level of rates in the system of local taxes and fees were insufficient to create normal living environment. "If municipalities are willing to allocate more resources and to conduct real economic policy, this proposal is one of the options; if they do not want it, we will not impose it forcibly", the Minister said.

In connection with the work of the trustees of CCB, Minister Goranov said that the published lists with assignment transactions, which were subsequently linked to set-offs, affected the bankruptcy estate of the bank and violated the fairness in the equal treatment of its creditors. "The problem is that there is no collateral for the majority of the extended loans and in the time until the bank was declared bankrupt there has been a long period during which there were complex transactions with multiple transfers of assets so that they drift far from any direct connection with the loans taken from the CCB. All this will greatly hinder the work for restoring the bankruptcy estate", Goranov added.

Asked why the work of the hired company "AlixPartners" is confidential, the Minister explained that it was due to the fact that if those, who in bad faith attempted to steal assets of the bank, knew what actions the company had performed and where, in tracing the chain of transactions and actions, it had established connection with the assets they could easily continue to actively break the links between the bank's assets purchased with funds from it and their returning to the patrimony of the bank. "The protection of the public interest at this stage implies non-disclosure of the information until all cases are closed, Goranov concluded. The Finance Minister announced that next week the trustees of CCB would present a summary report on everything done so far.  

On the topical issue of the opportunities for growth of the Bulgarian economy Vladislav Goranov said that there were prerequisites for higher growth than planned, but it was early to change the projections already made; he was clear that the Ministry of Finance preferred to make conservative and sustainable economic forecasts.