site.btaCentral Bank Deputy Governor: Current Spending Is Cause for Concern, Question Is whether Budget Deficit Can Be Maintained at 3%

Current spending is a cause for concern, and the question is whether the budget deficit can be maintained at 3%, Petar Chobanov, Bulgarian National Bank (BNB) Deputy Governor in charge of the Banking Department and member of the BNB Governing Council, said here on Tuesday. He was speaking at a forum titled "Finance: Equations and Solutions" and organized by Bulgaria on Air and Bloomberg TV Bulgaria.

Chobanov added that the issue lies in current spending, as capital spending is assumed to be limited by a threshold that cannot be exceeded.

He criticized the formula adopted for determining the minimum wage, which he said "creates more problems than solutions". Under the Labour Code, the minimum wage is set at 50% of the average gross wage of the last two quarters of the previous year and the first two quarters of the current year.

In Chobanov’s words, as a result businesses are disproportionately impacted, particularly in regions where the minimum wage is excessively high.

Efforts must be directed at restoring balance in the pension system and reducing the growing reliance on budget transfers to fund pensions, he added.

The BNB Deputy Governor spoke of the need for reforms in the healthcare sector. "It is high time to reshape the system, placing the healthy person, not the sick one, at its core," he said. Chobanov added that many structural changes are needed, and addressing this issue first requires the adoption of a budget.

Petia Dimitrova, CEO and Chairperson of the Management Board of Postbank and Association of Banks in Bulgaria Board chairperson, shared data indicating that state revenues stood at BGN 2.7 billion as of September, while expenditures amounted to BGN 5.4 billion.

She pointed out that banks in Bulgaria are subject to strict regulation, not only by BNB but also by the European Central Bank. Dimitrova added that banks are taxed three of four times more than other businesses in Bulgaria.

"We comply with all requirements, which demand significant capital investment," she said, adding that the perception of banks’ excess profits is often exaggerated. Dimitrova noted that banks capitalize their profits, warning that excessive pressure on banks could slow or disrupt the economic cycle.

In her words, banks have already made investments in preparation for the anticipated euro adoption in Bulgaria.

She noted that as of this year, banks in this country are subject to a 15% tax, adding that this rate applies exclusively to the banking sector. "With all the additional expenses banks are facing and the fact that they are taxed double or triple, the ability to capitalize, which is in line with the State’s economic growth, will, at best, decrease," Dimitrova said.