site.btaFinance Minister Porozhanov: This Year's Budget Deficit Will Exceed 1.8% Cap

Sofia, August 12 (BTA) - This year's budget deficit cannot remain within the 1.8 per cent limit but it must not exceed 3 per cent of GDP on an accrued basis according to Eurostat requirements and everything possible will be done for the deficit on a cash basis to remain within these limits, caretaker government Finance Minister Roumen Porozhanov said in a BTA interview.

He sees his main obligation as a minister in this government in creating conditions for the year to end with a normally functioning budget system.

There are two main problems before the execution of this year's budget: the higher revenue projections and the suspension of European funding for some programmes, Porozhanvo says. To avoid loss of funds under the European programmes the Ministry of Finance will try to transfer funds from the Regions in Growth operational programme to the suspended European programmes in order to restore payments.

Measures to reduce non-performance of revenue will also be suggested.

One of the directors of the revenue agencies will be replaced, the Finance Minister said.

Porozhanov is convinced the bank system is stable. In respect to the troubled Corporate Commercial Bank (Corpbank), the Bulgarian legislation provides for a procedure which should be followed. No one would take the liberty to violate the law and he does not believe there will be a repetition of such cataclysms over the months to come.

Taking a question whether there are "mines" in the budgets of the individual ministries, Porozhanov said they are currently making initial evaluation. Next week will reveal how the basic fiscal parameters of revenue and expenses stand and their influence on the deficit.

Regrettably, it appears that the amount of expenses made in the last few months is quite formidable while the revenue is below the budget target - some 900 million leva from taxes and excise duty alone as as this moment.

According to the ministry, there are conditions and opportunities to reduce this revenue non-performance to reasonable limits. The principal problem of revenue is that it has been raised by 11 per cent compared to what was reported last year against a calculated 1.8 per cent growth of the economy. "This is impossible to achieve, no matter what measures are planned for improving compliance," Porozhanov comments.

Preparations for a motion to update the budget will begin from the middle of September, after it is seen how the intended measures work at the revenue agencies.

The ministry is also working on the application forms to seek aid under the EU Solidarity Fund because previously prepared forms did not comply with the applicable procedure. They are currently being transformed with the help of the Deputy Prime Minister in charge of EU funding and will duly be sent.

The government intends to provide the necessary funding in advance because it is needed now, and it will subsequently be reimbursed by the Solidarity Fund.

Asked whether he sees a danger of the sanctions imposed on EU countries by Russia to have an impact on the Bulgarian economy and what effect he expects on the budget revenue, Porozhanov said this is yet to be analyzed.

"It is also very important to regain the confidence of the EU and the players on the investment market in Bulgaria. The restriction of investments towards such a large market as Russia would presuppose that some investments could turn towards Bulgaria," he says.