site.btaGovernment Proposes Revising 2019 State Budget Act to Accommodate F-16 Fighter Jets Deal

July 15 (BTA) - The Council of Ministers on Monday
approved a bill to amend and supplement the 2019 State Budget
Act to accommodate the costs of buying eight F-16 fighter
aircraft for the Bulgarian Air Force, the government press
service reported. The ministers wrote in their reasoning for the
 bill that this new type of fighter aircraft is extremely
important for Bulgaria's national security and defence and for
implementing NATO's collective defence mechanisms and the EU's
common defence and security policy.

Following negotiations with the United States government, a
formal proposal was made to sign four separate contracts between
 the two countries' governments to allow Bulgaria to acquire
eight F-16 Block 70 fighter aircraft, armament and related
systems for long-term operation and maintenance, as well as to
ensure comprehensive training of pilots and auxiliary personnel.
 The contracts were signed by Defence Minister Krassimir
Karakachanov on July 11 and are due for ratification by the
National Assembly.

The contracts envisage that the money for the estimated costs of
 the deal should be deposited in full in a US government account
 shortly after the contracts are signed, the press release said.
 The money thus deposited will be used by the US Defence
Security Cooperation Agency (DSCA) to make payments over the
course of the implementation of the contracts. Under the US
Foreign Military Sales programme, part of the money to be
remitted by the Bulgarian Defence Ministry to the US government
can be deposited and invested in bank and investment accounts at
 the Federal Reserve Bank of New York, allowing Bulgaria to earn
 income on these deposits. The process of setting up such
accounts and transferring the money could take about six months.

This requires signing an agreement between the Bulgarian Defence
 Ministry, the DSCA and the Federal Reserve Bank of New York,
with the Bulgarian National Bank possibly sharing in the
agreement as a state agency. The amount of the money which may
be transferred in this way will be determined by the DSCA. The
US government account should have enough money to cover current
DSCA payments under the project for 90 days. It is standard
practice to invest this kind of money in overnight deposits and
low-risk short-term federal treasury bills with various maturity
 periods.

The Bulgarian government press service went on to say that this
financial model for the F-16 deal requires extra expenditures in
 addition to those approved by the National Assembly in the 2019
 State Budget Act. Therefore, the Council of Ministers has
prepared a bill to amend and supplement the 2019 State Budget
Act, aimed at increasing the expenditures of the Defence
Ministry by 2.1 billion leva.

The bill does not imply any changes to the maximum size of the
government debt by December 31, 2019 or the maximum amount of
new government debt which may be assumed in 2019.

At the same time, the bill proposes expenditure cuts in the
state budget. It suggests that the original state budget
allocation of 271 million leva for other Armed Forces upgrading
projects should not be spent this year.

Based on an estimate that the F-16 purchase will push up state
budget expenditures this year by 1.829 billion leva in net
terms, the bill proposes that the state budget deficit be
increased by that amount, meaning that the deficit will reach
2.228 billion leva.

Also on Monday, the Council of Ministers decided to propose to
the National Assembly to ratify the four contracts (Letters of
Agreement, LOAs) on the purchase of the F-16 fighters: LOAs
BU-D-SAB (F-16 Block 70 aircraft and associated support), LOA
BU-D-AAA (Munitions in support of the F-16), LOA BU-P-AAD
(Sidewinder AIM 9X Block II Missiles, associated material and
services), and LOA BU-P-LAR (Multifunctional Information
Distribution System Joint Tactical Radio System (MIDS JTRS) (5)
and related support and equipment).

The contracts were signed by Bulgaria on July 11 following a
Council of Ministers decision the previous day. The negotiations
 for the contracts were conducted upon a resolution of the
National Assembly, promulgated in the State Gazette, No.51/2018.

After the expected Bulgarian ratification enters into force, the
 Foreign Ministry will notify the US government that the
national ratification procedures have been completed.

* * *

Deputy Defence Minister Atanas Zapryanov told a news briefing
that there are no "hidden costs" in the F-16 deal. The content
of the four contracts has not changed since the latest meeting
of the Council of Ministers, Zapryanov said. "In case of a
positive resolution by the US Congress, it will be possible to
add more Bulgarian requirements during the implementation of the
 contract, because it is flexible," he said. RY/VE

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