From On January 1, 2025, the minimum wage for the country will be BGN 1,077 instead of the previous BGN 933, which is an increase of 15%. This is provided for in a draft government decree published for public discussion. How do we earn our salaries, what happens to the budget… The financier Lubomir Karimanski spoke to FACTS.
- Mr. Karimanski, we are seeing a series of dramas in different parties, and the state is going somehow. No one is talking about the new budget, and you raise a lot of questions. What worries you the most?
- According to the Law on Public Finances and the procedure for drawing up the country's state budget, we should be in a period of preparation of the Law on the State Budget of the Republic of Bulgaria (ZDBRB) for 2025 and the adoption of a medium-term budget forecast. One of the main things about the preparation of the budget is what policies will be spelled out for the individual sectors in the draft ZDBRB and whether a caretaker government has the mandate and legitimacy to plan the necessary measures for the implementation of these policies. The election campaign will coincide with the final phase of the preparation of the state budget by the current caretaker government. I am concerned about the rate at which the budget deficit has grown over the past two months. At the end of July, the Ministry of Finance (MOF) reported a negative balance of BGN 972 million under the Consolidated Fiscal Program (CFP). Just one month later, the Ministry of Finance reported a deficit of BGN 1.6 billion, which is an increase of about BGN 628 million in one month. We should not forget the funds on the collection accounts from the beginning of the year, so the deficit of the consolidated budget will be about BGN 2.8 billion. An outstanding challenge for the current administration will be the measures they will put in the budget and the medium-term budget forecast to bring the budget deficit within 3 percent, not only for 2025, but also for the four-year planning period. If this is done at the expense of capital expenditure – we condemn the country to stagnation, instead of having convergence within the EU, we will have an even greater lag compared to other countries that invest their funds in infrastructure and conditions for economic growth. We should not forget that there is currently no state of emergency in Bulgaria, so the goal of the MoF and the government should be towards a balanced budget or one with a 1% deficit. Worryingly, pro-cyclicality in public sector minimum and average wage increases and pensions will further exacerbate this problem. The National Assembly increasingly seizes functions of the executive power and tries to carry out the operational work of the government by voting on various decisions. This is extremely dangerous for the separation of powers in Bulgaria. It is unacceptable for deputies to increase the minimum wages for entire sectors through specialized laws by linking them to the average salary for the country.
- It has already become a tradition to make a budget in the fall and to update it in the summer. Is this how the country is run in two strokes – fall and summer…
- It is acceptable when an update is required. I consider it a big mistake to include the so-called Appendix 3 in the 2024 ZDBRB year – it defines all municipal projects that will be implemented and for which it is necessary to conclude contracts. Do any of the journalists, and why not the deputies, know how much money was provided in the 2024 budget for the implementation of the projects for which contracts are being concluded?
The funds were around BGN 500 million, and with the latest update, the projects increased to a value of over BGN 6 billion.
Shouldn't it happen that one day the next regular government can find a signed contract without being secured by liquid funds?
- For the first seven months of 2024, you are talking about a deficit of nearly BGN 1.6 billion. How is it accumulated?
- The main increase in the deficit comes from the unprincipled increase in wages and pensions. Never before have the transfers from the state budget to those of the National Institutes of Health and the NHIF exceeded 50% of the respective budgets. And now that's exactly what's happening.
- The debt for this year alone is nearly BGN 10 billion. What does this mean?
- Does this mean that in the current election campaign, citizens should be actively interested in what this money was spent on? Are they invested somewhere to bring added value to the generations or are they spent to cover the increased costs of the state for salaries and pensions. For the second quarter of 2024, the average salary in the public sector overtakes the average salary in the private sector. And the salary increases voted in the specialized laws for the Ministry of Internal Affairs, Ministry of Defense, etc. are yet to come. for 2025, which will further increase the state's expenses, at least by another 1.2 billion BGN.
- How much debt can the state bear?
- The state's debt has been voted in the 2024 National Budget for 2024, as well as laid down in the medium-term budget forecast. The debt for 2024 is forecast to be BGN 48.9 billion, BGN 57 billion at the end of 2025 and BGN 66.5 billion at the end of 2026. Let's see what will be written down, after the calculations of the MoF in the new Medium-term budget forecast, as well as in the project of ZDBRB for 2025.
- The unions want a minimum wage from January of BGN 1,077. Is it reasonable?
- You know, the growth of the economy in the country is thanks to consumption, not thanks to productivity. And that worries me because we are reducing our competitiveness both within the EU and with third countries. Adding to the fact that we are one of the last to implement innovations in production – the problem is getting worse.
- Are we going to print money to ensure it in the budget?
- We should not forget that we are in the conditions of a monetary council and this is unacceptable. The exits are not many – increase in debt, reduction of state administration at the expense of digitization and reforms or raising taxes.
- With this management style, where do you see the dream eurozone in time?
- It is necessary to reduce the political risk, to achieve sustainability and predictability in the management of the country, in order to be able to plan a certain period. And hardly any date is the most important thing. It is more important to have real progress in convergence, not to imitate it.