Банкеръ Weekly



The implementation of the 2002 budget in the first two months of the year is very good, Deputy Minister of Finance Kiril Ananiev said regarding allegations in the press that the Treasury is not in good health. According to Mr. Ananiev, the first tranche of USD40MN, released on February 28 under the agreement with the International Monetary Fund (IMF), is an indication that the fund is satisfied with the fulfillment of the commitments, undertaken by the Government.The biggest payments, due in the first half of 2002 for servicing Bulgaria's foreign debt, were effected without problems in January and February. The budget spent BGN277.9MN for servicing principal and interests of Bulgaria's liabilities to the London Club, BGN40.7MN - to the Paris Club, and BGN39.7MN - to the World Bank. Mr. Ananiev claims that these payments are the main reason for the BGN153.2MN deficit, reported for the first two months of the year, which is 59.5% of the projected for the entire 2002. By the end of the first six months the Treasury will not have any other big expenses for payments to our major creditors and the deficit in the budget will decrҐase, the Deputy Finance Minister believes.For comparison, in the first two months of last year the deficit was BGN343.3MN, or 81% of the projected for the entire 2001.The budget results by end-March will show that we'll fulfill the criterion, entered in the agreement with the IMF, for a deficit of BGN138MN for the first quarter of the year, Mr. Ananiev commented.The optimism of the Deputy Finance Minister is justifiable, because in addition to the huge expenses for servicing the foreign debt in January and February the Treasury also paid a tax credit of BGN150MN. This is 75% of the total amount of VAT, claimed for refunding, which means that the budget will not have large expenses under this item in the remaining months of the year.The expenses for payment of interest, made in the first two months of 2002, represent 32.6% of the total amount projected for the entire year as against 31.9% for the same period of 2001.In the beginning of 2002 the Treasury extended 3-month interest-free loans to the National Insurance Institute, worth a total of BGN145MN, and to the Ministry of Regional Development and Public Works, amounting to BGN20MN. These credits will be paid back in March and April, and will go to the revenue side of the budget.Proceeds from taxes into the Treasury in January and February accounted for 14.9% of the amount projected for 2002, with stable incomes from VAT, which is the main source, Mr. Ananiev specified. Some BGN135MN was collected from profit taxes, and according to the Deputy Finance Minister, this result was to a large extent due to the reduction of the profit tax rate from 20% to 15% for companies with positive financial performance exceeding BGN50,000. Proceeds from customs duties were stable too, reaching BGN25,711,900 in January and February (from the total amount of BGN100MN, projected for the entire 2002.A risky part in the budget is the possible nonfulfillment of non-tax proceeds, Mr. Ananiev pointed out. Revenues from them by February 28 were just 4% of the projected in the 2002 national budget. The main reason for this are the low proceeds from excise duties.Taking into consideration all this, the report of the Finance Ministry by February 28 for revenues of BGN1,752,700, expenditures of BGN1,905,900, and deficit of BGN153.2MN, means that there would be no problems regarding the fulfillment of the 2002 budget by the end of the year.

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