site.btaFinance Minister Petkova Presents 2025 Budget to Relevant Committee in Parliament

Finance Minister Temenuzhka Petkova said at the Budget and Finance Committee meeting on Wednesday, “We are betting a lot on revenue, on fighting the grey economy. Bulgaria is one of the leaders in terms of the share of the grey economy and what we are proposing within the framework of this draft law on the state budget is to wage a decisive battle in this direction.” The committee considered at first reading the draft budgets of the State, the National Social Security Institute, and the National Health Insurance Fund for 2025.

The Budget Committee is meeting jointly with the Social and Health Committees. At the meeting, Minister Petkova presented the parameters of the draft state budget for 2025.

“We believe that there is a serious reserve and we are obliged to apply all the means of the law and all the possibilities that both revenue tools of he NRA and the Customs Agency, so that we can really achieve good results in terms of tax revenue collection,” Petkova said.

She noted that the procedure related to the drafting of the State budget is long and goes through a series of stages. Our government took over at a time when there was a draft State budget bill for 2025 tabled by the caretaker government, it was not considered by Parliament. Separately, the so-called extension budget law was adopted and is in force, which is in force now, Petkova pointed out.

“We had to analyse the situation in the field of public finances in one month, to make a quick review and to propose adequate measures and an adequate draft law on the State budget, which would meet public expectations and outline the development of the main policies in our country,” the Finance Minister said.

According to Petkova, there are certainly many comments on the draft budget, but she reiterated that this is the "possible" budget. “The analysis that we have made regarding the state of public finances has shown that all this uncertainty, political timelessness that has occurred in the country in the last four years, the lack of taking clear political responsibility in making important decisions related to public finances and some experiments in the field of public finances have had their negative impact on the overall state of the budget and the country's public finances,” Petkova said.

“It will take time to bring Bulgaria's public finances back to a sustainable state, to make them predictable and to improve the budget balance,” Temenuzhka Petkova further said. She added that this can happen by pursuing a conservative fiscal policy, but this takes time. “That is why I say that this budget is the "possible" budget, it is based on the current legislation. There is no change in the country's tax and social security system, no taxes have been changed, no taxes have been raised, no new ones have been introduced,” she said.

Fiscal Council member Lyubomir Datsov presented the Fiscal Council's opinion on the draft budget for 2025. In his words, the risks for the economy in 2025 are not unambiguous, as monetary policy in Europe is trying to support economic growth, but at the same time fiscal policy is creating demand for credit.

The direction of the budget needs to be changed, and the Fiscal Council is recommending a return of public spending to below 40% of GDP.

"The budget in a good year should be 38% no more, right now we are going to 40%, which means there is a significant structural problem in it," Datsov said, adding that the Fiscal Council is aware that this problem cannot be solved in one year.

Datsov added that it is recommended to abolish the so-called automatic formulas for determining the amount of salaries and social payments, as they are pro-cyclical and create pressure on the budget.

The Fiscal Council also recommends changing the budgeting model by changing the structure of the discussion, and it would be appropriate to consider a program budget.

Bulgarian National Bank (BNB) Deputy Governor Petar Chobanov presented the institution's opinion on the draft budget. In his words, the BNB has consistently in recent years expressed its opinion on the need to improve and maintain fiscal discipline. "We believe that a 3% deficit is not necessarily fiscal discipline," Chobanov said, adding that the BNB believes that we should move towards fiscal consolidation. “There should be a drive towards greater efficiency of public spending and structural reforms,” Chobanov said.

The BNB Deputy Governor gave the example of the recently published by the European Commission "Competitiveness Compass", which recommends simplifying regulations.

According to Chobanov, the country has a significant need for debt, which means that these funds must be spent wisely and precise planning of both domestic and external debt issuance is needed.

The draft budget for 2025 has a deficit on a cash basis of BGN 6.4 billion or 3% of GDP. It envisages that in the next four years it will be shrunk to 2.2% of GDP. 

The amount of new debt that the State can take on in 2025 amounts to BGN 18.9 billion. The state debt is expected to reach BGN 61.7 billion or 26.6% of GDP this year.

Economic growth is expected to be 2.8% in 2025, with GDP projected to reach BGN 215 billion at current prices.

The budget proposes a new excise duty calendar for tobacco and tobacco products, with rates rising faster than originally envisaged, as well as measures to improve fiscal control by upgrading the information system and optimising risk analysis.

The minimum insurable income for self-employed persons and farmers is increased to BGN 1,077 from April 1, 2025. 

The maximum insurable income for all insured persons is increased for the whole forecast period to BGN 4,130 for 1 April 2025, BGN 4,430 for 2026, BGN 4,730 for 2027 and BGN 5,030 for 2028.

The estimates for the period 2025-2028 take into account the increase in the minimum wage from January 1, 2025 - from BGN 933 to BGN 1,077.

The contribution to the Pension Fund of the NSSI remains unchanged for 2025 and 2026, but is planned to be increased by 1 percentage point from 2027 and by a further 2 p.p. from 2028.

In the medium term, CFP expenditure is within the rule under the Public Finance Act not to exceed 40% of GDP (excluding expenditure made from accounts for EU funds and other international programmes and treaties equivalent thereto, including related national co-financing), ranging between 39.5-40.0% of GDP over the period 2025-2028.

The minimum size of the fiscal reserve as of December 31, 2025, is foreseen to remain unchanged compared to the BGN 4.5 billion set in the State budget for 2024. 

For the period 2025-2028, pensions for labour activity granted until December 31 of the previous year shall be updated as of July 1 of the respective year according to Article 100 of the Budget Act or the so-called Swiss rule. Additional funds amounting to BGN 1.033 billion have been earmarked for updating pensions from 1 July 2025.

[Swiss rule: Pensions for work activity awarded before December 31 of the previous year will be updated annually starting July 1, according to Article 100 of the Social Insurance Code. This is known as the Swiss rule, which adjusts pensions based on inflation and wage growth.]

The draft budget for 2025 estimates a 5% increase in staff costs for those structures for which no other increases are foreseen in implementation of adopted regulations and existing policies.

In 2025, the policy of updating the salaries of teaching staff in secondary education to 125% of the average gross salary in 2024 is maintained, with an increase in expenditure of BGN 499 million.