20.08.2014

"The main problems of the state finances at this stage are in the planning of the revenues in the 2014 budget, that are not to be performed within the Law adopted, and in the increased expenditures for the first seven months of the year", Minister of Finance Rumen Porodzanov stated at a press conference after the meeting of the Council of Minister (CM) at which he informed the Government about the report on the state budget implementation on a cash basis and about the key indicators of the Consolidated Fiscal Programme (CFP) as of 31 July.

The reported disproportion between planned and actual revenues has a direct impact on the CFP, Porodzanov said. The deficit under the CFP is BGN 1,147.2 million and is formed by a deficit under the national budget of BGN 647.5 million and a deficit under EU funds of BGN 499.7 million. For comparison, for the same period of 2013 the deficit was BGN 167 million.

"The main problems come from the planning of revenues, the planned revenues under CFP are by BGN 2 billion more, of which BGN 1.7 billion tax revenues, compared to the reported for 2013 revenues or 11% more, while the macro framework of economic growth is estimated at 1.8%", Minister Porodzanov explained. The planned overestimated revenues presume higher expenditure; for the first 7 months of the year they are by 7.2% or BGN 1.2 billion higher compared to the same period of last year. Minister Porodzanov commented that resources should have been spent more prudently so as to compensate the revenue underperformance by reducing expenditure. He gave as an example that since the beginning of the year by CM decrees additional expenditure of ministries and agencies had been approved to the amount of BGN 867 million of which BGN 395 million had been spent as of the moment. These additional expenditures include also around BGN 150 million incurred for projects and programmes under the Public Investment Programme "Growth and Sustainable Development of the Regions". Added to those should be also the municipal projects under the Programme that amount to around BGN 350 million. "These additional expenditures correspond also to the deficit reported today and have not been compensated by the overestimated planned in the state budget but underperformed revenues. We must contain the deficit within 3% both on a cash and accrual basis", the Minister was firm and stated that the Ministry of Finance was actively working on improving the work of the revenue administrations and the revenue collection.

The second problem the budget faces is the not reimbursed funds under the two Operational Programmes, Environment and Regional Development, being the main reason for the deficit under the EU funds, Minister Porodzanov specified. "We have claimed BGN 480 million expenditures before the EC that have not been reimbursed under both Programmes. The National Fund budget, where the funds for all operational programmes are, is not planned for suspended by the EU payments under OPs." Minister Porodzanov again reiterated that a Government priority was the reimbursement of the suspended payments under the OPs. "We will ensure funds for the non-reimbursed payments in order to minimise the negative effects of losing money under the European Funds and the transfer of these losses as a burden on the budget in the next year", he further said.

"Under these circumstances it is difficult to avoid budget revision", Minister Porodzanov emphasised. He specified that discussions with the ministries and agencies were being held at the moment in order to ascertain where the biggest problems for financing were, conditioned on 15% cut of their expenditure, given the revision of the NHIF budget. Minister Porodzanov envisages an analysis to be made around 15 September and then a draft to amend the State Budget Law to be prepared that is to be presented to the next National Assembly and government.

As regards the Public Investment Programme Minister Porodzanov specified that at the moment data were collected from the beneficiaries and an analysis was being made to see what savings could be made there. He further specified that he could not stop projects that had already been started and it was foreseen to convene soon a meeting of the Interdepartmental Council of the Programme at which to discuss the issue.

In response to a journalist's question about the impact of the CCB supervision on the economy of the country Minister Porodzanov stated that each ministry should make an analysis. The Ministry of Finance considers globally the decisions on the issue and how they affect the public finances. The Finance Minister stated that "a solution with market instruments of the problem is being sought in order not to engage public resources for the saving or rehabilitation of the bank", but specified that any questions about the bank were the sole responsibility and within the competence of the BNB.

You can find the presentation with the data for the CFP implementation as of 31 July 2014 here.