According to the Maastricht Treaty, the state budget deficit should not exceed 3% of the gross domestic product (GDP) and the total government debt should not exceed 60% of GDP.

So far, these criteria have been strictly observed in Bulgaria and public spending has been closely monitored. It is no coincidence that the country was among the best in the European Union in these indicators. Moreover, budget revenues often exceeded public expenditures, and there was a budget surplus and an increase in the fiscal reserve to 6.5 billion euros. But now things look different. In just one month, the surplus turned into a rather large deficit. Things remain under control for now, as the deficit of more than 2 billion euros is within the budget approved by the National Assembly and does not exceed 3% of GDP, and public debt accumulated last year is only 1.9 billion euro.

In November, Bulgaria’s Finance Ministry reported a surplus of 327m euros in the state budget. A month later, however, this surplus and many other funds turned out to be spent, resulting in a deficit of more than 2 billion euros.

According to the Ministry of Finance, the annual deficit will be EUR 300 million less than the maximum amount set in the budget law (EUR 2.3 billion). The main factor for the achieved improvement of the deficit is the better implementation of the revenues, as compared to the previous 2020 they have a nominal growth of about 4 billion euros. (17.8%), with 14.4 billion euros collected from taxes and fees alone, or about 400 million euros more than planned. Revenues, grants and donations in the country's budget for 2021 are expected to amount to more than 26 billion euros, compared to the planned 25.5 billion euros, which is 103.2% of the updated annual estimate. Compared to 2020, revenues have grown by more than 4 billion euros. Expenditures in the budget (including the contribution of the Republic of Bulgaria to the EU budget) for 2021 amount to almost 29 billion euros, which is 101.8% compared to those foreseen in the budget for the year.

How can this unexpected and sharp turn in public finances be explained?

The social costs and the costs related to the coronavirus pandemic must be mentioned first. The government has continued to support businesses and socially vulnerable citizens in the context of the health crisis and accelerated inflation. New public spending, in favour of retirees and the health care system, has been added to existing measures. Funds have also been set aside to compensate for the shock rise in electricity prices for businesses. In addition, traditionally, the state seeks to repay the debts accumulated during the year in the last month of the year.

Obviously, additional funds will be needed to fill the gap in the budget. In all likelihood, they will be procured by increasing external debt. However, this does not seem to be very dangerous for the financial stability of the country, whose liabilities do not exceed 30% of the GDP with a permitted ceiling of 60% in the Maastricht rules.

English version Rositsa Petkova