28.10.2013

The focus of the 2014 budget measures aimed at urging economic growth is on making public expenditure more efficient and improving the quality of public services, the proposals of tax legislation for reduction in the administrative burden of and better functioning of the single account. This is what Minister of Finance Petar Chobanov says in an interview for Standart Daily. "We should not see the budget only as an instrument for higher economic growth but as the overall attitude of the government through its programme", says Mr. Chobanov and adds that providing better climate will stimulate the business to start thinking again of investments.

The philosophy of the 2014 budget terminates the current practice of allocating extra resources to each institution without having a clear idea about their allocation. That is why, we have decided to reduce the so-called administrative budgets of ministries but leave an option for them to budget result oriented projects competitively from these resources set aside. He specifies that the result sought is to restart and accelerate growth because otherwise fiscal discipline may not be sustainable in the medium term. Minister Chobanov mentions the most important additional funds planned in the next year's draft budget, i.e. BGN 100 million for education and BGN 500 million for the national public investment programme called "Growth and Sustainable Development of the Regions". He explains that institutions and municipalities will be able to apply under this programme with projects by an announced application form. The idea according to Minister Chobanov is to target projects and programmes at economic growth, employment, competition of the economy and minimisation of regional disproportions.

Minister Chobanov says that the role of the Bulgarian Development Bank (BDB) for urging economic growth will be to stimulate the small and medium business. He points out that the Bank has sufficient resources but will negotiate with the European Investment Bank on a new scheme for funding SMEs. The ceiling for this resource will be BGN 300 million and if used in an optimal way, it will contribute to accelerating the economic growth and will stir lending in the country, the Minister is convinced. A new strategy of the Bank is to be adopted, says Minister Chobanov.

The considerable reduction in the anticipated non-tax revenue in the 2014 budget according to Mr. Chobanov is due to the fact that there are one-off effects this year that will not be repeated next year. There is also a change in the policies towards state-owned enterprises that is important to their financial status, namely reducing the percentage of the dividend collected from state-owned enterprises from 80% down to 70% for next year with a tendency for this percentage to drop down to 50% in the following years as it was several years ago. The financial status of state-owned enterprises has worsened, their indebtedness has increased and they have fewer opportunities to implement an adequate investment programme. The Minister is explicit that some measures must be taken in this respect.

At the end of 2014 government debt is expected to be BGN 18 billion, i.e. to increase by BGN 3.4 billion, and right after that, in January 2015, an issue of global bonds will be repaid, which will result in its dropping by BGN 1.7 billion, says the Finance Minister. The new debt issued in 2014 to mature in the following years will amount to BGN 4.4 billion. The Minister divided it several categories according to its purpose. The first category is of those BGN 1.7 billion to be used for the repayment of debt in 2015. BGN 1.3 billion will be used to repay debt maturing in 2014 and the remaining BGN 1.4 billion will be used to fund the budget deficit and to increase the fiscal reserve, he explains. Active participation on the international financial markets is planned for next year, some market survey is done of the possibilities and the period in which new debt will be issued, as well as of its amount, but the financial markets are quite dynamic in recent years, adds Minister Chobanov. This is a complex problem and there is no direct answer as to how much and when this debt will be issued but we have a large set of instruments which we will use effectively to get the best indicators for attracting public resources, the Finance Minister Petar Chobanov is explicit.