The liabilities of the Bulgarian National Bank to the government, which are practically equivalent to the fiscal reserve, were 5.98 billion leva at the end of last week. This is shown by the weekly balance of management “Issue“ as of April 4 (Friday), published earlier today. Given that today the state has paid out between one and a half billion and two billion leva for pensions, it turns out that the government, out of lack of money, barely avoided the need to reach into the reserves of the pension system.
The Silver Fund amounted to 3.96 billion leva, which means that the state had liquidity of at most half a billion leva above it. This is a paltry buffer against the backdrop of an economy with an annual volume of 215 billion leva and a budget with planned expenditures of 96.7 billion leva. It is almost certain that the state has already spent about 80% of the remaining buffers that form the fiscal reserve – including the funds for decommissioning nuclear power plants, for radioactive waste management, the teachers' pension fund and several other smaller components.
The domestic loan of half a billion leva in the form of Government Securities, which was withdrawn today, temporarily brings relief. Higher-than-usual revenues are expected this month – both from the Bulgarian National Bank's contribution from its profit and from tax payments under the closing personal income tax campaign for the past year.
However, all these are palliative measures that only temporarily stabilize the situation, without solving the serious problems of public finances. The fact that a loan is being taken just to avoid resorting to the Silver Fund shows that the budget is in a serious crisis - a state similar to that after the resignation of the first "Borisov" cabinet in 2013.
Even if this month, thanks to one-off factors, the budget "takes a breather", from May onwards the state will again be in a state of uncertainty - whether current revenues will cover current expenses.
Even more worrying is that this is happening only in the first month of the budget's operation. Even if "Continuing the Change" and Assen Vassilev try to shift the blame onto this year's "powdery" budget, its implementation has not yet begun to create the problems that are yet to be expected. The current situation is the result of the inertia of the three previous years of excessive spending. And if over 20 billion leva of debt was withdrawn then, then for this year alone a new 17 billion are planned – which means that within 12 months new debt equal to 8% of GDP will be issued. No one found it necessary to prevent this when adopting the budget.
The finance minister is about to try to bring calm through appearances in parliament and the media. He will probably explain that the loans in the amount of 17 billion leva represent an “open opportunity” to cover extreme scenarios. And to some extent he will be right in his efforts to calm.
But the calculations do not add up. If by the end of March Bulgaria already has a budget deficit of 1.9 billion leva – one third of the planned annual deficit – what lies ahead in the remaining nine months? How will the investment program be implemented? With 13 billion in capital expenditures that have not yet begun to be paid, how will the deficit be limited to 6 billion leva - i.e. 3% of GDP?
I am writing the following paragraph with particular care, because I do not wish to belittle anyone's loss in any way, but it is already clear: accidents occur not only because of irresponsible drivers, but also because of dangerous roads. Whether they are dangerous due to a lack of maintenance by the "Road Infrastructure" Agency or due to systematic underfunding is not entirely clear. However, the fact is indisputable that state investments have been used as a buffer for years to cover up fiscal deficits. And society is starting to pay the price for this - with human lives.
Budget 2025 is the first to clearly show the need for an update in the first month after its entry into force. We remember a similar case in 2010, when delayed payments from the previous year blocked the economy. A second example was in 2020 due to the pandemic. But then the public had hope that after the state of emergency, things would return to normal.
Today, this is not the case. The economic slowdown is global. It is very likely that the projected growth will not materialize. This requires the budget update to be far more responsible - with measures of a scale not seen in the last two crises. It is probably time to increase the social security burden. Perhaps also VAT - temporarily or for a longer period. This should be determined by expert analyses and realistic forecasts.
Anything else would mean entering a debt spiral or austerity that would lead the country to ruin.