Банкеръ Daily


How Big Will the Budget 2021 Gap Be?

The moment is approaching when the Ministry of Finance will publish the draft budget of the state for the following year.  The government painstakingly exports little information about the financial framework, thereby trying to attenuate tensions amid protest pressures and criticism from Europe.

At the same time, however, economists and financiers are more excited about the basic parameters of the financial framework. "The big question is how much the next year deficit will be and to what extent it makes sense, that is, policies that fight the coronavirus or have other goals and to what extent the exaggerated spending will be," the economist Petar Ganev commented, according to whom the purse is now more loosened and this is worrying.

The government has opened a loophole for increasing the budget deficit above 3% of gross domestic product. This will happen through changes to the Public Finance Act. The public consultation procedure was completed on 12 October and the texts are due to be tabled in parliament. Their main idea is to remove this statutory threshold.

The other key change relates to the redistributive role of the state. Currently, the state can reallocate up to 40% of GDP, i.e. the budget expenditure should not be greater than that. The new idea is to subtract the European Union expenditure from the spending part of the consolidated fiscal program, i.e. from the EU funds - the plan for the recovery of Europe and anti-crisis schemes such as the SURE instrument, under which our country received a loan of 511 million euros.

The draft amendments to the Public Finance Act propose one more important thing - the unused additional costs of the ministries' budgets be redirected to other policies with a decision of the Minister of Finance. According to the Finance Ministry, this will give the state more flexibility in managing public funds and in removing restrictions on the absorption of money.

"If we fall under a new quarantine and a bloating of spending, then there can be a big problem with the deficit", according to Petar Ganev.

The government promises budget 2021 will increase spending on salaries in the administration and budget sphere. On Tuesday, Finance Minister Kiril Ananiev announced that a 20% increase in salaries in municipal administrations is planned from the next year. The government is also proposing to increase remunerations in as many as 34 separate administrations that are said to be working "on the frontline" to fight the coronavirus.

The CITUB requested that Budget 2021 enshrine a 20% wage growth in all structures of central and local administrations that have not received a 30% increase in staff resources in connection with the work in Covid-19 conditions. The Interior Ministry's union is also pushing for a pay increase for police officers and reiterates protest readiness if that doesn't happen.

In turn, Prime Minister Borisov announced that a 10% increase in salaries in the budget sphere is planned for next year, which includes the uniforms. An additional BGN 360 million is provided for teachers' salaries to meet government’s commitment to double their pays within the mandate. "That's why we're anticipating a 10% increase in incomes as we've been doing all these years. BGN 360 million for the teachers in order to complete what we have promised", Boyko Borisov explained.

An additional BGN 1.8 billion is provided for pensions.

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