Ministry of Finance: Bulgaria is facing Bankruptcy, there is Risk for the Fixed BGN-EUR Exchange RateFinance | March 15, 2023, Wednesday // 14:06| views
Acting Minister of Finance Rositsa Velkova-Zheleva
Bulgaria is threatened with bankruptcy. There is a serious problem in maintaining fiscal stability.
There is a risk of a change in the existing exchange rate of the leva against the euro. Our accession to the Eurozone has to be postponed indefinitely. Borrowing from the IMF may be necessary to save fiscal stability. This will impose serious financial restrictions. In this situation, income will be frozen.
These are just some of the serious problems Bulgaria is facing. They are contained in a report by the Acting Minister of Finance Rositsa Velkova-Zheleva, writes BGNES.
Her remarks are regarding a draft protocol decision of the Council of Ministers to approve parameters, assumptions and measures for the development of a draft Law on the State Budget of the Republic of Bulgaria for 2023, an updated medium-term budget forecast for the period 2023-2025 as reasons for it and medium-term budget forecast for the period 2024-2026.
"The estimates developed by the Ministry of Finance show that, if the policies adopted in 2022 are kept in effect and the fiscal effects of the regulations that came into force predetermining revenues and expenses are reflected, the full-year effect for 2023 implies a significant deterioration of the budget balance of the 'Public Administration' sector in the amount of 6.9 percent of GDP, which the Ministry of Finance signaled as early as August last year," warned the Minister of Finance and added that this was the result of the political measures taken by the last few Parliaments.
She emphasizes that as a result of the measures that were taken by the 47th National Assembly, which elected the government with Prime Minister Kiril Petkov and Finance Minister Asen Vasilev, "the year-round effect of the implementation of these policies and the displacement of unrealized investment costs lead to a significant increase of budget expenditures for 2023 and in the medium term the deficits are again in the order of 6-7% of GDP".
With these parameters, without undertaking consolidation measures, the following risks emerge:
- The maintained fiscal sustainability is seriously deteriorating in the medium term;
- The structure of expenses is changed in favor of constant expenses for social payments and remunerations and lack of flexibility for dropping existing and implementing new policies and programs;
- The risk of including Bulgaria in a procedure on excessive budget deficit is increasing, already based on forecasts of violation of fiscal rules, which gives rise to obligations to take immediate, corrective measures, the failure of which may lead to sanctions from the EC, including the suspension of EU payments;
- Postponing for an indefinite time the country's accession to the Eurozone or setting conditions for changing the currently fixed exchange rate of the leva to the euro;
- Probability of deterioration of the country's credit rating;
- Increase in the cost of debt financing and difficulties in issuing external and internal loans, which will create liquidity problems for financing budget expenditures, as well as lead to a significant increase in interest costs for debt servicing. In this scenario, Bulgaria may have to use a loan from the IMF, which will also impose restrictive fiscal requirements as a condition for granting the loan;
- If the outlined negative trends for the deficit are maintained, the possibility of approaching the upper limits of the debt criterion of 60% of GDP at an accelerated pace increases.
"To overcome these risks, the government should make every effort to adhere to the digital fiscal rules and restrictions under the Public Finance Law, respectively to propose permanent consolidation revenue and expenditure measures to reach the target levels of the deficit for the period 2023-2026", states the Minister of Finance Rositsa Velkova-Zheleva.
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