Банкеръ Weekly


State Spends More

Despite the incessant calls of the government for austerity measures, the state is spending far more extensively than last year. For the first eight months of 2011 the central and local governments have substantially increased costs for construction, supplies and services, their volume, even approaching the levels for the whole 2010. A check at the Public Procurement Agency showed that between January and August the Cabinet awarded contracts for BGN3.2 billion, EUR 115.6 million, JPY40 million and USD475,000. For the twelve months of 2010 the value of these contracts was BGN3.57 billion, EUR243 million and USD49 million. Thus, if the trend towards expanding expenses is maintained until the end of December, state bodies are likely to record a growth of 30-40 per cent in money going to public procurement.
In spite of all data pointing to continued decline in the construction sector, the funds directed by the government and local authorities in this field has been increasing and has reached BGN1.59 billion against BGN1.43 billion for the entire previous year. Estimates for September, October, November and December, are even more optimistic. In the field of ecology only - for treatment plants and landfills - experts expect another BGN300 million to be spent while around BGN150 million will go for the Struma highway. So the total amount will certainly exceed BGN2 billion, which on its turn stays far from the achievements in 2008 and 2009.
Good pace is observed in the expenses on supplies. At August 20 they already reached BGN1.4 billion against 1.86 billion for the entire 2010, while service contracts for about BGN550 million have been concluded against BGN800 million in 2010.
The more money for public tenders cannot be taken as a sign of a reviving economy. The increase is mainly due to the effect of the EU funds, which actually became visible to the broad public as late as this year. Thanks to funds from the operational programmes, state and municipal bodies fill serious gaps in their budgets and therefore have the opportunity to spend more money for new projects. This is the case at least in theory. In practice, however, things are somewhat different. In most cases, mayors and ministers continue to delay payment to already executed contracts, which poses a serious challenge to businesses. It is true that now the delay has been shortened to three or four months compared to six or seven months last year, but in times of crisis this also can be too much. According to the Bulgarian Industrial Association, most significant are the debts of local governments, but judging by the statistics presented by the Finance Ministry, as at 30 June total arrears of the central government reached BGN235 million, while municipalities owed BGN202 million.
In the last four years the Agency for State Financial Inspection has checked over 5,500 procurement procedures for more than BGN5 billion, and found administrative violations in 60% of the cases. Most often the problem is introduction of conditions that restrict some of the candidates or give preference to others. The Agency has found more than 1,000 cases of procedures that were not conducted which damaged the state treasury by BGN220 million.

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