Money matters

Bulgaria FinMin: Revised Budget 2010 Taps into Fiscal Reserve

Finance
Bulgaria's finance minister has confirmed reports that the revised 2010 budget law taps into the fiscal reserve as the government battles recession and seeks for ways to fill in the budget gap.
“This is the most reasonable way because it is free of charge. People say “Save money for rainy days.” This is exactly what the fiscal reserve is for,” Minister Simeon Djankov said on Sunday.
“Every other option means that Bulgaria will have to fork out more money for foreign banks. This is unreasonable for the time being,” he added.
According to the finance minister the revised budget bill will be fully prepared next week when the cuts in the administration expenditures are finally clear.
The center-right cabinet, which swept to power in July last year, had to revise the budget after it decided to slash public spending by 20% instead of increasing value added tax to back the public finances.
It has already give the green light to a plan to cut state wages, freeze pensions and sell public property to keep a low budget deficit and maintain fiscal stability.
The fiscal reserve will slump from BGN 6.4 B to BGN 4.5 B at the end of the year, shows the revised budget that the government has tabled in parliament and which local Sega daily has obtained.
Prime Minister Boyko Borisov had previously said the country will issue debt to fill in the fiscal reserve and give a sign to foreign observers that the currency board is stable.
Bulgaria operates in a currency board regime, under which the lev is pegged to the euro, and is obliged to keep a fiscal reserve. At the end of March it stood at BGN 6.3 B, flat month-on-month, and down from BGN 7.95 B in the same period a year ago, data showed.
Bulgaria passed a 2010 budget planning for a 0.7% deficit, but was forced to revise that target to 2.4% at the start of the year.
Bulgaria’s budget deficit will reach 2.8% of gross domestic product (GDP) this year, after 3.9% in 2009, according to a European Commission forecast.
The government forecasts economic growth of 1% this year after a 5.1% contraction in 2009.