site.btaCabinet Adopts Draft 2020 State Budget Update to Finance COVID-2019 Containment Effort, Tackle Revenue Undercollection

Sofia, March 30 (BTA) - At an extraordinary meeting held by
video conference on Monday evening, the Bulgarian Government
adopted a draft Bill to Amend and Supplement the 2020 State
Budget Act, the Government Information Service reported. The
purpose of the draft legislation is to authorize increased
spending required under the Act on the Measures and Actions
during the State of Emergency and address the expected
undercollection of budget revenues.

According to a baseline scenario, revenues from value added tax,
 corporation tax, income taxes on natural persons, social
security contributions, etc. will fall short of the 2020 targets
 by an estimated 2.44 billion leva. As a result of this
underperformance, domestic demand, export and import will
shrink, the employment rate will decline, and the assumptions of
 the price of crude oil and the US dollar exchange rate will
have to be revised. Because of the expected fall in revenues,
the budget balance needs to be updated to a deficit of 3.5
billion leva (2.9 per cent of projected GDP).

In addition to the COVID-19 containment effort, measures to back
 up the economy and job holders are also prioritized. The
"60/40" job security measure, proposed by the Government and
adopted after a discussion at the National Council for
Tripartite Cooperation, will require a 1.43 billion leva
increase of the transfer from the State budget to the public
social insurance budget (1 billion leva to disburse
layoffs-avoiding compensations and 430 million leva to offset
the expected shortfall of revenues from social security
contributions).

The bill also provides budgeting for another economic support
measure planned by the Government: an option to issue an extra
700 million leva State guarantees on loan agreements for
financing of the Bulgarian Development Bank (BDB).

Together with the 700 million leva capital increase of the BDB,
the proposed deficit will reach 4.2 billion leva. To finance
this deficit and to provide for sufficiently liquid fiscal
buffers against a worse-than-expected scenario, the Council of
Ministers proposes raising the ceiling on the incurrence of new
government debt from 2.2 billion leva under the budget law to 10
 billion leva. In this connection, interest payments under the
State budget are to be increased by 70 million leva. LG