Bulgarian Cabinet Approves 2016 Deficit-Cutting Budget

  • Government revises 2015 budget gap to 3.3% of economic output
  • Bulgaria plans foreign debt sales of up to 3.9 billion lev

The Bulgarian cabinet approved next year’s budget draft, which seeks to boost growth and narrow the budget deficit after widening this year’s gap to exceed the European Union’s limit.

The draft bill, which needs to be voted in parliament, envisages a deficit of 2 percent of gross domestic product in 2016 and revises the 2015 budget gap to 3.3 percent of GDP from the initial goal of 3 percent, Finance Minister Vladislav Goranov said in Sofia on Friday. The government sees economic growth of 2.1 percent next year, after an estimated expansion of 2 percent this year, driven by demand and EU subsidies.

“It’s not the best budget, but it is a realistic budget which takes into account the country’s needs next year,” Goranov told reporters. “It guarantees stability in an environment of economic problems and risks related to global security.”

The European Union’s poorest country in terms of per-capita output seeks to cut inefficient spending in health care, pension system and education. Rising numbers of migrants from the Middle East and conflicts in Syria and Ukraine fuel expenses on police, refugee shelters and defense. On Oct. 21 Eurostat revised Bulgaria’s 2014 budget deficit to 5.8 percent of output from 3.7 percent, to include the liabilities of the Bulgarian Deposit Guarantee Fund after repaying deposits in the failed Corporate Commercial Bank AD.

Debt, Fighters

Prime Minister Boyko Borissov’s government plans total debt sales of as much as 5.3 billion lev ($3 billion), which includes foreign debt sales of as much as 3.9 billion lev. The funds will be used to repay debts, to cover the deficit and “provide a financial buffer,” Goranov said. In March, Bulgaria sold 3.1 billion euros in bonds on the international markets.

“Our goal is to gradually reduce the deficit,” Goranov said. “The envisaged debt is the maximum possible limit. It’s part of the three-year’s borrowing program approved this year.”

Next year’s spending is envisaged at 39.4 percent of output, which will decline to 38.2 percent in 2018, according to the draft. Revenue is seen at 37.4 percent in 2016 and 37.1 percent of GDP in 2018. Average annual inflation is forecast at 0.5 percent next year after estimated deflation of -0.9 percent in 2015.

The cabinet has also envisaged funds to start the purchase of destroyers and eight fighter jets next year, Goranov said.

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