Bulgaria’s Debt Set to Explode Next Year and Here’s Why

Finance Minister Temenuzhka Petkova outlined the reasons behind the projected rise in Bulgaria’s debt for next year, which is set to reach 10.5 billion euros. She detailed the components included in this amount, noting that it covers a deficit of 3.6 billion euros, the refinancing of maturing obligations, and several additional financial commitments. According to Petkova, the breakdown includes 1.4 billion euros for refinancing existing debt, 1.2 billion euros for the purchase of shares, 0.9 billion euros for other financial operations, and 3.2 billion euros related to the SAFE loan instrument, which also forms part of the debt ceiling for 2026.

Petkova presented the framework for next year’s budget to the parliamentary Budget and Finance Committee, adding that the government intends to adhere to the parameters set within it. She also commented that the European Commission’s latest economic forecast closely aligns with that of the Ministry of Finance. The projected deficit for 2025 remains at around three percent of GDP. For 2026, the European Commission anticipates a deficit of 2.7 percent, rising to approximately 4.3 percent in 2027, a trend Petkova attributed to higher planned defense spending.

Responding to questions about whether the budget might undergo changes between readings, in light of calls from both the opposition and employer organizations, Petkova said the draft has been submitted to parliament and further decisions rest with the MPs. On the possibility of Christmas bonuses for pensioners, she noted that such a move would depend on how revenues and expenditures develop as the year progresses.

Petkova reminded MPs that social security contributions were last raised in 2018. She pointed out that pension spending will reach 24 billion leva in 2025, with the transfer from the state budget exceeding 12 billion leva, the highest to date. According to her, this level of expenditure necessitates a long term solution to ensure the sustainability of the pension system, and she stressed that all proposals being considered are well justified. She also confirmed that the government has no intention of adjusting VAT.