15.02.2015

"If the state wants to ensure a horizon for sustainable access to the financial markets in the next 3 years so as to be able to pay its accounts and finance its deficit, what I have proposed is, in my view, the most reasonable approach, especially in the context of the fact that the markets are now excessively liquid and the assumption of new debt could take place at very favourable terms and conditions." This is what Minister of Finance Vladislav Goranov said in the Nedelya 150 programme of BNR. He assured that the assumption of a debt of EUR 8 billion for the entire period would correspond to the limits authorised by the annual state budget law. According to Minister Goranov, the rebuke of assuming debt above what is allowed by the annual budget law is groundless as this is an agreement for intermediary services and for an assumption of such an amount of debt.

The Minister of Finance explained that "the maximum interest of 10 per cent and the maximum maturity of 30 years are not something unusual for such a type of issue. They are set as the upper limit very far from what will be actually achieved". "It is the short sales recently made that allowed the concentration of several maturities over a couple of years, between 2015 and 2017, of debt of around EUR 6 billion assumed by Bulgaria that has to be repaid", Mr. Goranov added. He gave as an example the years 2012, 2013 and 2014 when the maximum interest of 10 per cent whereat the Parliament authorised the Government to assume debt were exactly those while the outcome was far below those 10%. According to him, the same also referred to the maturity of 30 years with the only difference that "for the first time Bulgaria gets the chance to assume a more long-term issue of debt, which will relieve the maturity structure in the relevant years so as to avoid the concentration of debt".

According to Mr. Goranov, the ratification was required to provide resources with which the state would "finance its liabilities and will pay pensions, i.e. will finance the deficit". He added that "by 2017 the Bulgarian state will have to pay in order for it to get a debt of over EUR 6 billion refunded. By 2017, the Bulgarian state will plan a deficit of over EUR 3 billion." "If the state wants to assume debts to pay its accounts, it should stop paying its accounts with all the consequences", he commented the probability for not making the ratification of the agreements for the debt of EUR 8 billion. Asked why an agreement needs to be signed with banks for a three-year period and not year by year as done before, the Minister answered that "this medium-term programme guarantees that the Bulgarian state is ready at every time, when needed, to borrow money to cover its liabilities". According to him, it is important for the Government to have a strategy as to how it will secure this volume of payments so as to avoid the state's insolvency in case of a possible political instability.

Minister Goranov defined as inaccurate the speculations that by assuming debt, the Finance Minister or the Government make spending comfortable because "the expenditures in the Bulgarian budget are voted by the national Assembly and may not be exceeded by a single lev". Answering to the criticism in the past week, he reminded that many lies had been said in the debate over CCB but the new Government ultimately needed, as early as in the first years of its term of office, to seek financing to ensure the payment of the insured deposits in CCB. He laid stress on the fact that "debt is a consequence rather than a reason for anything in our economy" and pointed out that "from now on, if anyone wants to have a serious discussion for public finance, it should be structured around the question of either having a budget surplus, i.e. spending more than we earn, or collecting revenue and in what way. Then the topic of debt will drop off".

Vladislav Goranov also said that the 2015 budget performance goes well, as planned. "The mere fact of having in January 2015 BGN 440 million of revenue more than the same period of last year shows that: first, we have collection reserves that will allow budget execution without having to change taxes and contributions, and second, that the 2015 budget will withstand the tensions it suffers from the decreasing fuel prices and from changes in some policies", the Minister explained and did not exclude the option of ultimately having a deficit lower than planned. He noted that "since the start of the year we have taken extremely serious measures to improve collection and it is not accidental that we have a surplus for the first time since 2009".

In connection to the election of a new deputy governor of BNB, Minister Goranov said that as currently there was no consensus on a possible nomination, the deputy governor would be elected in a couple of months when there would be a debate.