site.btaMedia Review: January 29

ECONOMY AND FINANCE

The Bulgarian government is mulling measures to reduce the budget deficit to 3% by February 14, when the new cabinet is expected to propose a 2025 budget. The measures under discussion are focusing on tackling the shadow economy. Earlier in January, Finance Minister Temenuzhka Petkova said the first-quarter deficit would be over BGN 3.634 billion, which would be covered from the fiscal reserve.

In an article headlined "Clampdown on Grey Economy Aims to Raise BGN 4Bln to Cut Budget Deficit to 3%", 24 Chasa catalogues some of the measures under discussion. A crackdown on the shadow economy is expected to generate an additional BGN 4 billion by addressing tax evasion and undeclared business revenues.

Some of the measures include stricter fuel sales oversight and mandatory GPS tracking for trucks over 3.5 tonnes to prevent tax fraud in the transportation of goods. In a bid to combat smuggling and the underreporting of imports, the Customs Agency will set reference prices for imports to prevent tax losses from undervaluing of goods.

The caretaker government's proposal for a tax amnesty for undeclared income has been scrapped as it was expected to generate only BGN 300 million. No tax increases are likely in 2025; except a return of 20% VAT on restaurant services and bread (previously reduced to 9% and 0% respectively).

Other measures target increases in public sector salaries and pensions. Now that inflation is down to 2.2% year on year, pay rises in the public sector will be limited to 10%, while pension adjustments will follow the Swiss rule, slowing down increases. The government is planning to decouple social benefits from the minimum wage to restrict the outreach of benefits to those who truly need them. Discussion is under way on civil servants starting to pay their own social insurance contributions instead of having them covered by the state.

Possible additional revenue sources under consideration include a new tax on natural resource concessions, selling military properties, and issuing government securities for purchase by the public through the Bulgarian Development Bank as an alternative savings instrument with a 3%-plus annual yield.

The accrual deficit could pose the most serious problem - the funds committed under the capital expenditure programme are an estimated BGN 4.8 billion, for which the Regional Development Ministry has signed contracts, 24 Chasa says.

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24 Chasa has details on a proposal to combat fuel tax fraud, launched by Delyan Dobrev MP of GERB, Chairman of the parliamentary Budget and Finance Committee. Petrol stations could be required to record vehicle licence plate numbers on receipts to curb VAT fraud, which is estimated to cost the state at least BGN 250 million a year. In the fraud scheme, some fuel stations keep discarded retail receipts and later use them to issue inflated invoices for companies, which then claim VAT refunds on fuel they never purchased. Linking receipts to specific vehicles will prevent fraudulent VAT claims, boost budget revenues and improve tax compliance. The Bulgarian Oil and Gas Association supports the proposal, acknowledging the existence of VAT fraud.

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Trud reports that inherited issues in public finances have prompted the Joint Governance Council (JGC) of GERB, the Bulgarian Socialist Party and There Is Such a People to discuss urgent measures to address the deficit. Participants in Tuesday's JGC meeting said that estimates show a 6.7% deficit at present. There will be no cuts in public sector salaries or social benefits, and taxes will not increase. One of the proposals is to increase pensions by 5% instead of nearly 9% according to the Swiss rule from July 1, and to gradually reach the higher percentage. According to the Swiss rule, pensions are adjusted annually by 50% of the previous year's inflation and 50% of the growth of the average contributory income.

Interviewed by the Bulgarian National Radio (BNR), former social policy minister Hristina Hristova talked about the pressure of budget expenditures in 2025. Expenditures increased considerably in the last four years amid political instability due to a string of parliamentary elections and populist decisions about the pension system and pay rises. She called for a further discussion on the increase in the minimum wage (which went up to BGN 1,077 from BGN 933 in 2024). Hristova commented that if pensions are raised by 5%, an act of Parliament must be adopted to justify this step. Under the Swiss rule, pensions should increase by 8-9%, she said.

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On Wednesday, Democratic Bulgaria (DB) accused Finance Minister Petkova of citing untrue deficit figures. The Bulgarian National Television (BNT) quoted Martin Dimitrov MP as saying: "The revenue data for 2025 are lower than in 2024. Temenuzhka [Petkova] should explain how she obtained these false data. She will calm down once she sees that there is no such deficit." Reacting to DB's criticism that GERB is sabotaging Bulgaria's entry in the eurozone, GERB leader Boyko Borissov said, as quoted by Trud, that during his term in 2020 the country joined the ERM II Exchange Rate Mechanism, also known as the eurozone "waiting room". It was Continue the Change and former finance minister Assen Vassilev that sabotaged entry in the eurozone for four years by pushing up inflation, said Borissov.

Interviewed by BNT, journalist Veselin Stoynev said the government started with a good level of public confidence after the long political crisis. The eurozone is a key objective but the government's first steps were "somewhat hesitant". 

ENERGY

Mediapool.bg looks at what it calls "flawed and addictive energy compensations for businesses". Since 2022, non-household customers, ranging from heavy industry and banks to small businesses, schools, hospitals and churches, have received over BGN 6 billion in compensations for high energy prices. The government will continue covering costs above BGN 180/MWh for electricity bought on the energy exchange until the end of March 2025, allocating another BGN 260 million without requiring energy efficiency improvements or setting financial criteria. Even companies with their own solar parks, which sell energy on the free market, receive compensations. The new Energy Minister, Zhecho Stankov, justifies the compensations as a way to curb inflation, though critics argue that they create dependency and divert funds from long-term energy transition projects. Currently, compensations come from the Security of the Electricity System Fund (SESF), funded by emissions quota sales and levies on power producers. Stankov defended the continued payment of compensations by saying that this helps companies remain competitive and preserves tens of thousands of jobs in energy-intensive industries. Interviewed by bTV on Sunday, he also said businesses are encouraged to increase wages using the savings they gain from these compensations. Meanwhile, critics argue that the current model is deeply flawed and creates dependency, as businesses grow used to having the government cover their electricity costs rather than seeking sustainable solutions. For instance, companies could enter into direct, long-term contracts with newly built solar power plants - something that telecom operator Yettel and retail chain Billa have already done. However, most companies and power producers avoid long-term contracts for electricity supply due to concerns about financial risks. Businesses fear committing to fixed prices, as they might end up paying more than the market rate at certain times, although the price on the free market may be higher in a short while. Energy producers hesitate because locking in prices for a year could mean missing out on potential profits during peak market fluctuations. As a result, both sides remain exposed to volatile market conditions. The good thing is that Stankov suggests targeting aid to strategic industries rather than granting blanket subsidies.

US-BULGARIA

The media report that on Wednesday Defence Minister Atanas Zapryanov is leaving on a three-day visit to the United States. He will attend a formal handover of Bulgaria's first F-16 Block 70 aircraft at Lockheed Martin's Greenville site in South Carolina on January 31.

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24 Chasa reported on Tuesday that the US Ambassador in Sofia, Kenneth Merten, has resigned as part of the administration change, and his resignation has been accepted by President Donald Trump. In the interim, the Embassy will be led by Martin McDowell, who served as Deputy Chief of Mission. The news was confirmed by the US Embassy.

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Trud carries a commentary by Viktor Blaskov headlined "Big Purge of Foreign Agents Starts in Bulgaria Too". He discusses the ongoing "purge" of foreign agents, driven by changes in US foreign policy under President Trump. Media outlets and politicians are shifting their stances as Trump is fulfilling his promises, such as cutting financial aid to foreign countries and withdrawing the US from the World Health Organization. These changes will expose individuals and organizations in Bulgaria that previously aligned with certain viewpoints because they received US funding. It will also become clear who is a genuine supporter of Euro-Atlanticism and who was simply exploiting American financial support for personal gain. Blaskov says it will be interesting to see how political figures who once championed environmentalism, illegal immigration and LGBT rights will now change their positions. There already are former champions of the European Green Deal who have started arguing for industry and cheaper electricity. Once the purge and Trump's term in office end, it will be apt to ask if US financial aid for Bulgaria has really benefited American interests, or those "agents" have actually harmed the US objectives while benefiting from American taxpayer dollars.

SERBIA AFTER PM'S RESIGNATION

Asked to comment on the situation in Serbia after Prime Minister Milos Vucevic resigned on Tuesday, journalist Rayna Asenova, formerly of BTA, told the Bulgarian National Radio that President Aleksandar Vucic is likely to opt for a government formed after snap elections as he did in recent years. On Tuesday, Vucic said the ruling party will decide in the next 10 days whether it will call snap elections or put forward a new government. The opposition is in favour of an interim government which will prepare the next elections. Vucic is well entrenched in power, and it is difficult to remove him, said Asenova. "This time, however, his position seems to be seriously shaken - not just because of the collapsed railway station canopy in Novi Sad [which killed 15 people last November]. Huge tension has built over the years." However, an impeachment procedure in the present parliament is not possible because Vucic has a majority.

bTV reporter Stoyan Georgiev, who has recently been to Serbia concurred with Asenova, saying that tens of thousands or even 100,000 people are protesting in Belgrade, Nis and Novi Sad as discontent with Vucic has assumed huge proportions. The collapsed roofing is just the trigger which set off the accumulated tension. One of the students is quoted as saying the protests will continue because culpable politicians must go to prison.

BALTIC SEA CABLE BREACH

BNT interviewed marine law expert Vladimir Vladimirov about the undersea fibre optic cable between Latvia and Sweden which was damaged on Sunday. The lawyer said at least four investigations would be conducted. First, the Swedish authorities will investigate the incident. Then Maltese Maritime Administration, under whose flag the ship is sailing, will carry out an inspection and analysis of the situation. The ship's insurer will also conduct a mandatory investigation. Additionally, an internal probe will be carried out by Bulgarian shipping company Navibulgar, which dismissed any possibility of sabotage on Tuesday. Vladimirov said it is unlikely that charges will be brought as the available data do not point to wrongdoing. He added that the ship could be detained, "but arresting and detaining the crew, particularly the ship's command at this moment, is unacceptable, and I assume this has not been done."

VIRAL INFECTIONS

Virologist Prof Todor Kantardzhiev talked on BNT about the infectious diseases circulating in Bulgaria. There is a rising trend in flu cases in regions where quarantine measures have been introduced. The national average incidence rate is 191 per 10,000 people, meaning that approximately two out of 100 people are affected. However, Sofia has fewer flu cases than the rest of the regions. In Sofia, an unusual situation has emerged, with various other viruses circulating instead of the flu, which normally suppresses them. The most common infections in the capital are adenoviruses.