site.btaUPDATED Finance Ministry Presents 2023 Draft Budget before Parliament but Will Propose Extension of 2022 Law

At the National Assembly on Tuesday, Bulgaria's Caretaker Finance Minister Rositza Velkova presented a draft national budget for 2023 and the current state of public finances.

Velkova's Ministry has drawn up three draft budget versions, of which the baseline one does not change the 2022 policies, she said, addressing the legislature.

According to the baseline version, the Finance Ministry expects a GDP of BGN 132.826 billion for 2023 (which implies an annual growth of 1.6%), an annual inflation rate of 6.4%, and a Consolidated Fiscal Programme (CFP) deficit of  6.6% of GDP.

Velkova said, however, that the caretaker Cabinet will introduce an "extending bill" to retain the effect of all policies and support measures for households and businesses and the amount of pensions until the election of a regular government. She recalled that such a bill was tabled last year.

"A regular government could adapt the baseline version of the 2023 draft budget to its governance programme. If no regular cabinet is elected, a caretaker cabinet could implement the budget by such an extending bill, as the regular government did at the beginning of this year," Velkova commented during a hearing in the debating chamber.  

The deadline for the submission of next year's draft budget to Parliament is October 31, 2022.

"The 3% deficit option does envisage tighter fiscal discipline, quite a few spending items should be cut, and we would not table such a budget," the Finance Minister said, asked by BSP for Bulgaria which expenditures will be pared and at the expense of which social groups.

Public Finances Performance in 2022

The CFP for 2022 is so far showing a BGN 989 million surplus or 0.6 per cent of GDP, but this does not mean that the end-of-the year budget will be in a surplus, the Finance Minister said.

In December, the European Commission is expected to disburse BGN 2.6 billion in payments under the Recovery and Resilience Plan (RRP). On the expenditure side of the 2022 budget, the BGN 8.4 billion capital expenditures will be reduced by BGN 1 billion under the RRP.

The electricity price compensations paid so far total BGN 3.7 billion, but they do not affect the budget balance.

BGN 540 million have been spent on Ukrainian refugees, of which BGN 176 million will come under EU-funded programmes and the rest will be covered by restructuring other budget expenduture items.

The end-of-the-year budget deficit for 2022 is expected at 3.4% of GDP, down from a planned cash-based 4.1% of GDP, Velkova said further on. The accruals-based budget deficit is expected at 5.4% of GDP, compared to a 6% estimate.    

2023 Draft Budget

The CFP revenues are expected to grow by BGN 5.9 billion in 2023. The draft budget takes account of the reduced VAT rate on bread, fuels and other supplies and the lowered VAT registration threshold.

The CFP expenditures are supposed to increase by BGN 11 billion in 2023, including BGN 1.9 billion in larger personnel costs and BGN 3.7 billion for larger pensions, including a pension rise effective July 1. 

According to the baseline version of the draft budget, the deficit will be 6.6% of projected GDP.

The draft does not envisage any changes in the inflation-cushioning support for businesses and households.

Continue the Change: Cabinet Bound by Constitution to Table Draft Budget 

The caretaker Cabinet must fulfil its obligation under the Constitution and lay a 2023 draft state budget before Parliament, Continue the Change Co-chair Assen Vassilev told a news briefing later on Tuesday.

He was adamant that the extension of the effect of the present budget is an indication that it can finance the State trouble-free next year, too, and dismissed as groundless all fears of a BGN 11 billion deficit and a BGN 16 billion debt.

"The draft budget that has been drawn up and that will not go before parliament plans revenues that are understated by BGN 4 billion and an expenditure side increased by BGN 11 billion and includes a BGN 3 billion increase of capital expenditures above the current capital programme which was unprecedented in history," Vassilev commented.

Approached by BTA, Venko Sabrutev MP of Continue the Change said that the Finance Ministry is obliged to introduce in Parliament one of the three 2003 budget versions. In his words, one of the versions is extravagant and plans billions of debt, the second one is conservative, and the third one is an extension of the previous year's budget.

He sees this as clear proof that the Continue the Change budget is good and that "the nonsense spoken today in the debating chamber about large deficits is not true. It actually turned out that we will end the year with up to 2% deficit, which means that in the year of the worst crisis we have achieved a record economic growth and a minimum deficit compliant with EU rules," Sabrutev added.