Банкеръ Daily


Nearly 2 Billion Levs from the Silver Fund Are Being Robbed

The inexplicable joy that the contract for Sofia Airport concession was officially signed by the Minister of Transport Rosen Zhelyazkov and the "Union Connect" partners pushed into the corner another disregard to the BG laws.

This time, as usual, by the instructions of one man - the "stable man", as he is called in the West - Boyko Borissov. The concession covers a period of 35 years, in which investments of EUR 608 million and an annual concession fee of EUR 24.5 million are expected. This money is ordered to cover part of the huge debts of the Bulgarian State Railways. It was Borissov’s order.


This is a unique situation because, in principle, the concessions money during these years - 875.5 million euros (or almost 2 billion levs) must go to the State Fund for Ensuring the Sustainability of the State Pension System - the so-called Silver Fund. And that would dramatically increase the funds raised in it, though


the government has traditionally circumvented its commitment.


"The budget law is stronger than the special fund law," top lawyers explained. So there is no legal problem.


"The problem is that future pensioners will be penalized by investing in an unreformed sector," said Lydia Shouleva, recognized as one of the founders of the Silver Fund.


"But there is a more serious problem," Shuleva said, "spending state money."

This is a sheer state aid for BSR which is generally banned in the EU. We will hardly learn from this government whether this operation was notified in Brussels and whether it was permitted, she explained.


"It’s all about that


if the money is transferred to the Silver Fund, the government cannot use it

due to a legal ban, while if it is directed to BSR, it can be spent at random, probably some of it has been stolen.


According to the latest data of the Ministry of Finance, the total monetary resource of the fund as of 30.06.2020 amounts to BGN 3.250 billion, of which BGN 3.236 billion are deposited in a separate account with the BNB. In June 2020, funds in the amount of BGN 13.96 million were transferred to the fund's account." This is a ridiculously low amount of money, but it is not a precedent. The poor fundraising in the fund is illustrated by other data. For the first quarter of this year the fund received BGN 13.98 million, in April - BGN 5.28 million. For the whole of last year the revenues are BGN 181.85 million, and for the previous 2018 - BGN 16.54 million.


"The silver fund is dead."


"The three billion levs are now part of the Fiscal Reserve; revenues have not been received for a long time and its active management has been forgotten even as an idea ", added Shuleva.


"For the ten years of its existence, the fund should have accumulated at least 20 billion euros. Only then would there be real meaning of this money", this is the conclusion of the former Deputy Prime Minister and former Minister of Social Affairs, founder of the consulting company "Business Intelligence".


After the Silver Fund was established in 2008 with a contribution of BGN 2 billion it has received only BGN 1 billion for the next 12 years - from privatization and concessions. "This is nothing," Shuleva said.


"These are pitiful sums."


In practice, the entire amount was deposited with the Bulgarian National Bank by the decisions of the fund's management board. Reserve money for pensions remains zero.


However, the conservative investment policy applied in the fund management ensures the achievement of a positive real return, i.e. the profitability is exceeding the inflation rate for a certain period. Thus, the requirements of the adopted Long-Term Investment Policy of the State Fund for Ensuring the Sustainability of the State Pension System and the Medium-Term Strategy for Investment of its funds in the Period 2018-2020 are met.


According to these two documents, the current market conditions


do not presuppose the realization of high profitability


at the selected low levels of investment risk, therefore, the best option for investing the Silver Fund resources will continue to be in the form of a deposit with the Bulgarian National Bank.


You can see through the naked eye that the proceeds in it are funny. And the idea of ​​the existence of the Silver Fund is to support the pension system. Its funds, however, are so low that they would be enough to pay the pensions in just a few months.


In 2060


the lack of money in the state pension system


will exceed 9% of the country's GDP, which is now the total cost of pensions. This forecast of the National Social Security Institute is conditional, of course, but there have been no prerequisites so far for a serious positive turn in demography to stop the aging and declining population. And this outlines an unpleasant dilemma for future governments - to reduce the money they need for other sectors or to increase taxes, which, however, will be borne by fewer and fewer working people.

Despite the budget surpluses in 2016 and 2017, there are no revenues under this item. By law, 25% of the realized surplus of the state budget must be transferred to the fund.


In this situation, in practice


concessions have been the only source of revenue


in the Silver Fund for the past five years. Revenues from privatization have long dried up and not a single lev has been transferred from the budget surpluses.



When the reserve pension fund was set up in 2008, the idea was to continuously fill it with privatization proceeds and concessions and to multiply its funds by investing wisely - in accordance with a clear strategy and legal regulation. For this period, however, the fund has been neither managed nor replenished as required by law.


The harm Simeon Diankov did

During the first government of GERB - at the suggestion of the then Minister of Finance Simeon Diankov, a legal mechanism was created to divert the proceeds from privatization and use them for other purposes. Prior to the sale, state-owned companies were transferred to the State Consolidation Company, which effectively sold them and transferred the proceeds as dividends to the state. According to the Bulgarian Chamber of Commerce experts, about BGN 500 million have been diverted in this way.


In November 2017, the government adopted a Long-Term Investment Policy of the State Fund for Ensuring the Sustainability of the State Pension System (the so-called Silver Fund) and a Medium-Term Strategy for investing its funds for the period 2018-2020. Both documents have been approved by the fund's management board and provide for maintaining the conservative approach, applied so far: to manage the assets in compliance with the principles of reliability, liquidity and transparency.


"When I created the Silver Fund, I left a deficit of BGN 200 million in the National Social Security Institute, which was about 8 percent," she recalled.

Currently, the deficit is over 40% and the amount is over BGN 4 billion. "From now on, the pension system is doomed to be co-financed by taxes only." Such is the pessimistic forecast of former Minister Shuleva.

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