Bulgaria Parliament Caps New Debt at BGN 5.3 B in 2016, Sets Debt Ceiling at BGN 26.6 B

Bulgaria will be able to borrow up to BGN 5.3 B in fresh debt next year to finance budget deficit, repay old debt and support recovery and restructuring programmes in the banking sector, if needed, the parliament decided on Wednesday.

Government debt cannot exceed BGN 26.6 B at the end of next year, the MPs decided, adopting parts of the government’s 2016 budget draft on second and final reading. A proposal submitted by the Socialist opposition to cap government debt at BGN 23.5 B was turned down.

Finance Minister Vladislav Goranov told MPs that the increased liquidity buffers in the 2016 budget aim to avoid a repeat of the 2014 banking crisis when the collapse of Corporate Commercial Bank (KTB) put public finances under strain, with the government having to spend about BGN 4 B to repay depositors in the failed lender.

It would be imprudent to leave the government without liquidity buffers next year when an unprecedented Europe-wide evaluation of the quality of assets of the financial system will be conducted, involving banks, insurers and pension funds, Goranov added.

TheMPs also decided that the government’s fiscal reserve shouldn’t drop below BGN 4.5 B at the end of 2016.

The government will be able to issue state guarantees of up to BGN 215 M in 2016.

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