The philosophy of the draft budget for 2025 is generally to distribute money that has already been promised. And here we cannot blame the Minister of Finance. They were promised in a manner similar to this reform for the merger of the "Customs" Agency with the National Revenue Agency through transitional and final provisions. This was commented on in an interview with the Bulgarian National Radio by the former Finance Minister in the cabinet of Simeon Saxe-Coburg-Gotha, Milen Velchev.
"A lot of money was promised under the air and now the Minister of Finance feels obliged to fulfill these promises. At the same time, not to violate the 3% deficit criterion," Velchev said on the "12+3" program.
According to him, the problem is that this task has no solution.
"You can't spend 20 billion leva more and the deficit will remain the same, it's impossible", the financier warned.
"Nothing prevented the Minister of Finance and the government from expressing their attitude to these unreasonable promises by proposing a budget without these promised expenses or by proposing two options. One with expenses, but also with an increase in VAT to 25% and other basic taxes, which is also unreasonable. But the deputies must realize and publicly account for their unreasonable decisions so far,", Velchev recommended.
According to him, pensions should not be increased by 8 – 9% and according to the Swiss rule, and to grow at the rate of inflation of 3%. When things get back on track, then the Swiss rule should be applied again, the former finance minister believes.
Regarding the measure to tax the excess profits of banks, he said that we will all pay for this as a society again, because the banks will raise the fees.
And he recommended:
"First of all, a stop should be said to wage increases with arbitrary percentages in the budget sector. These increases with transitional and final provisions should likewise be postponed until the moment when public finances return to a healthy state. Secondly, reducing the rate of pension growth, given that inflation is around 3%, betting on a 9% growth in pensions is suicidal, and this against the backdrop of the extraordinary increase in pensions during the pandemic".
Milen Velchev believes that his proposals are difficult decisions that a ruling majority must discuss and accept if there are no other options:
"There are other levers for reducing budget spending and all of them must be used. Restaurateurs and grain producers should have the old VAT returned and these temporary privileges should be restored, the pandemic has passed and they should pass".
And about possible protests that promise individual industries when VAT is returned, the financier said:
"When one or several governments show weakness and comply with all demands - private, narrowly sectoral, they will not be able to resist another wave of demands. And it will be like this in the future, if a little will is not shown".
Milen Velchev predicts that the logical end of Bulgaria will be like that of Argentina after the fall of the currency board.
And he admitted that he is skeptical of the proposal to merge the Customs Agency with the National Revenue Agency, because the new structure will not be effective.