Bulgaria EU Leader in Cutting State Expenditures, Stable Finances

Finance | December 29, 2009, Tuesday // 12:04|  views

Finance Minister Djankov has pointed out Bulgaria had the smallest budget deficit in the EU. Photo by BGNES

Bulgaria ends 2009 with a minimum budget deficit of 2009, and is a leader in the EU in terms of making savings from state expenditures.

This is the view of Finance Minister Simeon Djankov and leading independent economists as cited by the BTA.

“In a very hard moment in the middle of 2009, the government managed to cut a lot of its budget spending keeping the deficit relatively smalls. Bulgaria is probably going to the be country with the best public finances in the EU in both 2009 and 2010,” forecast Lachezar Bodganov, a managing partner at the Sofia-based consultancy Industry Watch.

According to Petar Ganev from the Sofia-based think tank Institute for Market Economy, most of the steps of the new Finance Minister Djankov are positive which is also visible from the ratings of foreign agencies and analyzers. He said the new government managed to stop the rising deficit after it took over in the summer of 2009 but then it decided to make compromises on certain expenses, thus ending with a minor deficit of BGN 0,5 B.

He has pointed out as positive steps of Djankov the measures to cut contraband, and the intentions to make reforms in state property, healthcase, and education, which are expected to envelop in 2010.

According to Bogdanov from Industry Watch, the new Finance Minister has overestimated the capacity of the new measures against smuggling to bring in higher state revenue. In his words, independent economists knew as a early as August that Djankov should stress even more cutting state spending than expecting the raising of more funds from anti-contraband measures.

Bogdanov said the stability of public finances in the 2010 state budget was the greatest advantage of Simeon Djankov’s work as the Minister had not slipped into populism and promises keeping a realistic view of 2010. The independent economist expects to see Bulgaria in the top positions of EU ratings of economic results.

Bulgaria’s Finance Minister himself has pointed out that Bulgaria’s 2009 budget deficit was only 0,75% of the country’s GDP which made it first in the EU on low deficit.

He has made it clear that the 2010 budget rests on balanced fiscal policies with no raise of taxes with the exception of the cigarette excise which is to become EUR 76 per 1 000 pieces starting January 1, compared to EUR 53 per 1 000 pieces currently. This raise is expected to bring BGN 226 M to the state budget in 2010, 130 M of which will be directed for state spending on healthcare.

Djankov has put forth the idea that if it had issues with securing funds in 2010, the government could issue state bonds instead of seeking loans from the IMF and the World Bank. A top priority of the government and the Finance Ministry is Bulgaria’s accession to the ERM 2 and the Eurozone.

One of Djankov’s reform ideas is uniting the banking and non-banking supervision into one institution. He said he was not satisfied with the work of the Financial Supervision Commission, and that it could be scrapped.

Another reform he is considering is uniting state property in various economic sectors into a unified state structure.

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Tags: Simeon Djankov, budget deficit, finance minister, public finances, state spending, balanced budget, state budget, Industry Watch, Institute for Market Economy, Lachezar Bogdanov, Petar Ganev


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