Bulgarian Parliament Approves Cost-Cutting 2016 Budget

  • Lawmakers raise deficit to 3.3% of GDP in 2015, see 2% in 2016
  • Draft has to pass item-by-item vote in parliament next month

Bulgarian lawmakers approved the 2016 state budget in a preliminary reading, seeking to boost growth and to reduce the fiscal deficit after it exceeded the European Union’s ceiling this year.

The draft, backed by the parties in Prime Minister Boyko Borissov’s ruling coalition, envisages a deficit of 2 percent of gross domestic product in 2016. The bill, which must pass an item-by-item vote in parliament next month, revises the 2015 gap to 3.3 percent of output from a previous goal of 3 percent. It aims to reverse widening that started last year when the government spent 4 billion lev ($2.2 billion) to repay deposits in failed fourth-biggest lender Corporate Commercial bank.

“The 2016 budget has a main task of preserving fiscal stability and reducing the gap between revenue and spending that opened with the misfortunes in 2014,” Finance Minister Vladislav Goranov said in the assembly.

The European Union’s poorest country by per-capita output is seeking to reduce inefficient spending in health care, education and the pension system. Borissov’s cabinet is also trying to reform the police and modernize the country’s army as migrants from the Middle East and the conflicts in Syria and Ukraine drive up spending on security and refugee shelters. Next year’s budget earmarks about 200 million lev ($110 million) to start the purchase of new fighter jets, warships and equipment for land forces.

Debt, Growth

The government plans to sell as much as 5.3 billion lev of debt next year, including foreign debt of as much as 3.9 billion lev, to cover the deficit and repay old debts, Goranov said. In March, Bulgaria sold 3.1 billion euros ($3.3 billion) in bonds on international markets. The budget draft envisages 2016 spending of 39.4 percent of output, while revenue is seen at 37.4 percent.

The cabinet sees economic growth of 2.1 percent in 2016 after a EU subsidies helped drive an estimated 2 percent expansion this year. Next year’s average annual inflation is forecast at 0.5 percent, after estimated deflation of -0.9 percent in 2015. Unemployment will decline to 9.1 percent in 2016 from 9.9 percent in 2015, Goranov said.

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