Bulgaria to raise 2014 budget deficit target to 3% of GDP, lift borrowing target

By bne IntelliNews July 15, 2014

Bulgaria is set to increase its 2014 budget deficit target to the upper edge of the EU limit of 3% of GDP from the initial plan of 1.8% of GDP and boost its borrowing target for the year, partially in order to provide funds to the ailing national health insurance fund (NHIF). This was agreed at a meeting on July 14 between President Rosen Plevneliev and officials from the parliamentary parties, the government and the central bank. The revisions of the state budget and the NHIF budget have to be endorsed by the parliament before it dissolves, probably later this month.

After the four-hour meeting, Plevneliev announced that the revision of the state budget is aimed to "guarantee a smooth transition to the caretaker government", while the borrowing limit has to be increased "within reasonable limits" and the caretaker cabinet should be allowed to sign loan agreements so as to be able to "guarantee the financial stability in the country". Bulgaria is set to hold early elections on October 5 after a break-up of the ruling coalition.

According to the original 2014 budget plan, Bulgaria's debt-to-GDP ratio should increase to 22.1% at end-2014 from 18.5% at end-2013, with 2014 borrowing needs set at BGN 4.4bn to finance this year's budget gap and retire maturing debt early next year.

The country swung into a general budget deficit of BGN 889mn (EUR 454.3mn) in January-May 2014 from a surplus of BGN 45.5mn a year earlier due to falling revenue and higher social and capital spending. The shortfall was equal to 1.1% of the full-year GDP projection.

NHIF, which is required by the law to end the year with a balanced budget, warned last month it would finish 2014 with a budget deficit of BGN 328.1mn, meaning that it will lack this amount of money to pay for healthcare services provided by hospitals and for special medicines.

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