The Bulgarian budget hole is growing increasingly faster

Bulgaria's budget deficit reached 1.4 billion euros at the end of September after the financial "hole" grew by another 600 million euros last month. The Bulgarian Finance Ministry data on the implementation of the Consolidated Fiscal Program (CFP) shows that the rate of growth in this indicator doubles every month - in August the deficit grew by 300 million euros.

At the moment, the non-fulfillment of revenues over expenses is still within the permissible range - at the end of the ninth month of this year, it accounted for 1.4% of the gross domestic product (GDP), and according to the 2024 State Budget Act, the deficit should stay within 3% of GDP, that is 3.1 billion euros.

This year, however, due to the sharp administrative increase in pensions and salaries in the budget sector, higher interest payments on government loans, the absence of dividend income and smaller proceeds from the sale of carbon emission allowances, the budget hole is growing at a much faster pace than previous years. What’s more, the main public expenses tend to accumulate in the last 2-3 months of each year, which threatens the 3% deficit limit, and accordingly also the accession of Bulgaria to the Eurozone.

The rate of increase in expenses, mainly social (pensions, subsidies and benefits) and personnel expenses, continued to outpace revenues in September, in accordance with the current regulatory changes approved by the National Assembly," says a statement from the Bulgarian Ministry of Finance.

In addition to the regular monthly expenses for personnel, maintenance and the social sphere (pensions and healthcare payments), in September there were also expenses for servicing the state debt (incl. interest payments in the amount of about 200 million euros), social payments from the Ministry of Labor and Social Policy (one-time benefits to families with children from 1st to 4th and 8th Grades for the 2024/2025 academic year, targeted benefits for the new heating season, personal assistance payments under the Personal Assistance Act, etc. totaling about 150 million euros), and others.

Basic parameters of budget execution

Revenues, benefits and donations under the CFP as of September 2024 are expected to reach 26 billion, euros which represents a nominal growth of 9.3% compared to the same period of the previous year. In September, the trend observed in the previous months continued to be that of a moderate increase in tax and social security revenues. Budget implementation as of September 2024 is expected to be 73% of the annual estimates, compared to 70.3% for the same period of 2023.

Compared to the first nine months of the previous year, CFP revenues increased by 2.2 billion euros (9.3 percent), with tax and social security payments contributing to this, which increased in nominal terms by 2.4 billion euros (13.2 percent) whereas receipts from grants and donations (mainly from EU programs and funds) increased by 0.4 billion euros.

In the same time comparison framework, non-tax revenues decreased by 650 million euro (15.6 percent), which is mainly due to dividend revenues and revenues from the sale of quotas for greenhouse gas emissions. In the nine months of 2023, dividend income from state-owned enterprises amounted to 800 million euros, while in the current year, the receipts for the period are only 50 million euros, whereas the plan was to receive 152 million euros. The main reason for this is the non-distribution of a dividend from Bulgarian Energy Holding's profit for the financial year 2023. Revenues from the sale of greenhouse gas emission allowances are affected by the smaller quantities and lower prices of allowances in 2024.

Expenditures under the CFP (including the contribution of the Republic of Bulgaria to the EU budget) as of September 2024 amount to 27.4 billion euros, which is 67.3% of the annual estimates. Compared to the previous year, there was an increase mainly in social sphere expenses, as a result of the higher pensions paid after the increases that came into force in July 2023 and July 2024. There was also an increase in personnel expenses, after the raising of the remuneration of teaching staff and other administrative employees according to the 2023 and the 2024 State Budget Acts. 

The part of the contribution of the Republic of Bulgaria to the EU budget, paid as of September 30, 2024, from the central budget, amounts to 550 million euros, which is in compliance with the current legislation regarding the EU's own resources.

Translated by Tzvetozar Vincent Iolov