Bulgarian Lawmakers Content With Budget Draft On First Reading

by Ulrika Lomas, Tax-News.com, Brussels

15 December 2008

The Political Council of the three-party ruling coalition met on December 5 to discuss the 2009 budget bill. The three political parties decided to keep the draft unchanged from the legislation approved by Parliament on first reading.

At the meeting the parties agreed that extra ‘buffers’ were needed to stabilise the economy from the possibility of an economic slowdown, but also agreed to keep the principal macroeconomic parameters within the draft.

Leaders Sergei Stanishev of the Bulgarian Socialist Party, Simeon Saxe-Coburg-Gotha of the National Movement for Surge and Stability and Ahmed Dogan of the Movement for Rights and Freedoms decided:

“Maintaining a budget surplus and substantial fiscal reserves makes it possible to react in case of a downturn in economic development, considering the global economic imbalances and the heightened external risks related to the financial volatility of international markets. A number of mechanisms intended to counter the financial and economic crisis are envisaged in the 2009 budget, grouped into three areas: economic activity, market flexibility, and flexibility of the social safety nets. The idea is to boost the economy, to maintain investment activity, and to cushion the possible impacts of the crisis on the enterprise sector.

“To maintain the sustainability of macroeconomic positions, consolidated budget expenditures (excluding the contribution to the EU general budget) will not exceed 40% of GDP, and a consolidated fiscal programme surplus will be kept within 3% of GDP with a possibility to reduce that level depending on the development of the economic situation and on budget revenue performance."

As another budget buffer, ministries will now be limited to using 90% of their allocation, as opposed to the 93% originally.

Public capital expenditures are planned to increase next year by a substantial 21% from 2008 to nearly BGN5.6bn (EUR3.8bn).

Of the additional BGN400m investment package included in the draft budget, BGN211m will go for national farm subsidies, BGN94.5m will be spent on modernization of the railway infrastructure, and the balance of BGN94.5m will go for socially relevant projects.

The health insurance contribution rate will be increased from 6% to 8% in 2009. As from January 1, 2009, the state will step in as a sharer in the social insurance contribution to the Pensions Fund, with the rest of the contribution being paid by employers (10%) and employees (8%).

Within the draft paid maternity leave has also been granted an extension from nine months previously to twelve months. However, only mothers who have kept up social security contributions twelve months prior to the claim will be eligible.

Unemployment benefits will be increased. A percentage of the benefit will be paid for the children in the family of the unemployed person, depending on their number, provided that they attend school.

The government has also vowed to raise pension contributions and real wages of those working within the public sector next year to try and improve Bulgaria’s prosperity and move it up from the status as ‘poorest in the EU’.

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