Банкеръ Weekly

Briefs

2003 BUDGET OVERCLOUDED BY MINISTER SHULEVA

The 2003 budget bill may also be called the Shuleva Financial Plan. However, it will hardly be remembered with positive feelings. The budget accounts were questioned even before they were put forward in parliament. The one to express doubts was the International Monetary Fund (IMF). It's not often that a representative of the Fund tells directly to the media the IMF does not accept the government plans for most tax revenues and even for part of the expenses. Statements of this type became frequent as the new mission of the IMF was about to visit Bulgaria. There were also such declarations after November 6, when the IMF experts arrived.The IMF is not the only one to make serious remarks to the budget. All parliamentary groups, including the Movement for Rights and Freedoms (MRF) - the coalition partner of the National Movement Simeon II (NMSII), began to attack the draft budget. All of them laid claims to it - the Union of Democratic Forces (UDF) and the Bulgarian Socialist Party (BSP) were firm they would not support it. The same political trick was earlier applied by MRF, too. However, after the November 5 meeting of leaders of the two parliamentary groups and the budget committee with representatives of the financial ministry (the deputy ministers Kiril Ananiev and Gati Al Djeburi), the MRF representative Arso Manov said MRF would, in principle, support the 2003 draft budget bill. After he lent a hand to the ruling majority, Manov underlined that MRF hopes the Government and municipalities will come to an agreement in the course of their talks on the budget details.The Ministry of Finance has planned that local authorities should spend BGN70MN for capital deposits while mayors insist on at least BGN135MN. It's interesring how these two positions will be compromised, keeping in mind the fact that they differ by BGN65MN missing. It is clear that the Government does not have much saved money. At least this is the opinion of IMF, and its experts are seldom wrong. It's true that the experts from the Ministry of Finance will try on their turn to prove that the budget has great reserves - about BGN500MN. But despite the media statements of several deputy finance ministers, the budget issue is more than problematic. And Deputy PM Lydiya Shouleva is to bear much of the blame for that. What can we do after Shouleva passed her fight-against-unemployment program in front of the Prime Minister and the Finance Ministry was ordered to finance it? What budget can we have then...?, complained an insider.It has been underlined many times that BGN4.905BN of the consolidated budget (45% of all payments) will be aimed at social expenses and help. BGN3,122.7MN will be spent on pensions (in comparison with BGN2,881.8MN in 2002). Other BGN246.6MN will enter the accounts of the social security and employment services which were provided only BGN194.9MN in 2002. Over BGN110MN will be spent on special help for the social weaks to buy fuel, pay their electricity and central heating bills. BGN87.2MN will be given for children allowances. BGN304MN will cover the fight-against-unemployment program of the Social Ministry. This money will be given to enterpreneurs who have appointed unemployed for more than a year or individuals without enough labour experience to be retired.The financial covering of Shouleva's social experiments have made the Government sound much too optimistic in the profits part of the budget. The draft budget foresees over BGN10.662BN to be collected from taxes, up some BGN1BN from 2002.The Government plans to get BGN2,943.2MN from VAT in 2003, up BGN164MN from 2002. Finance Minister Milen Velchev's experts obviously hope that by reducing from BGN50,000 to BGN25,000 the amount of the annual turnover, above which firms can register under VAT, the number of companies paying that tax would increase and the proceeds into the budget from it would go up accordingly. However, it is more probable that even those who have paid it so far would stop doing so because of the VAT-account, which becomes obligatory and practically upsets the entire philosophy of the tax credit. Moreover, it deprives the companies of the possibility to operate even several days in a month with the money remitted to them as VAT before they pay it to the budget. In that sense the anxiety of employers matches that of IMF's representatives, though for different reasons. For the businessmen this measure is restrictive, and IMF's team describes the situation quite more delicately. According to the IMF, the proceeds from VAT into the budget have been overestimated.It is a secret to nobody that the Fund's experts have a negative opinion about the planned proceeds from social insurance payments as well. The Government expects them to reach BGN3,703.9MN next year, up BGN496MN from 2002. The big stake here was made by the Deputy Premier and Minister of Labour and Social Policy Lidiya Shuleva who decided that by introducing social insurance threshholds more money would go to the National Insurance Institute and the National Healthcare Insurance Fund. In other words, the firms would be forced to pay the money, that will go for social programmes. The benefit from that operation is more than disputable, but the introduction of threshholds would doubtlessly make a lot of businessmen lay off some of their employees because it won't be advantageous for them to pay the admistratively imposed additional social expenses. So, it won't be a surpprise if IMF's most dismal forecasts come true. And if the expected proceeds from social insurance payments and receipts from VAT do not enter the budget, it won't be fulfilled. So, all social insurance programme of Minister Shuleva would fail.

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