Attempting to fight off sustained calls from protestors for it to resign, the Bulgarian government is set to increase the 2013 fiscal deficit from a planned 1.4% of GDP to 2%, Finance Minister Petar Chobanov announced on July 7.
The decision to raise the fiscal deficit comes as Bulgaria's lower than expected GDP growth has resulted in budget revenues that are around BGN1bn (€510m) lower than previously forecast. Bulgaria's economy is currently expected to grow by around 1% in 2013, up from 0.8% in 2012.
Meanwhile, government spending is now set to be around BGN500m higher than planned, according to contracts already signed with businesses. Speaking on national radio, Chobanov said that while the government had cut spending at ministries by 5% it had to increase the deficit to pay businesses on time.
"We are considering to increase the deficit up to 2% ... There is nothing dramatic about it. There are increased dues to businesses and a drop in revenues," Chobanov, said according to Reuters.
Prime Minister Plamen Oresharski, came to power nominated by the Socialist Party on May 29, after the previous government of the centre-right GERB resigned in February amid growing protests over poverty and corruption. However, there has been a new wave of anti-government protests since he took office. Crowds on the streets of Sofia are calling for the Oresharski administration to resign, and GERB is pushing for early elections in September.
Chobanov sought to reinforce claims that the blame for the raised deficit lies with the previous government, telling BNR that it had been overly optimistic in its 2013 growth forecast when it approved the budget deficit at 1.4%. On June 5, as he entered office, he had warned that the deficit target was at risk, both from elevated revenue forecasts and delayed spending.
At the time, he warned the fiscal shortfall could grow as high as 3.8%, although he pledged the new government would attempt to meet the 1.4% target by cutting spending. A new debt issue may fund the increased gap, Chobanov added on July 7, without offering details.
The announcement notably comes shortly after an International Monetary Fund (IMF) mission to Bulgaria concluded that the 1.4% target is "achievable". "However, any revenue shortfalls as a result of weaker-than-budgeted economic activity or delays in the reimbursement of EU funds should be accommodated and not offset by compressing expenditure below budgeted amounts. This would avoid pressure on an already fragile recovery," said the IMF statement, issued at the end of the mission on July 3.
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