An International Monetary Fund Mission visited Bulgaria between November 4 and 9, 2015, to discuss the economic outlook and related policies with the Bulgarian authorities. One of the main recommendations of the International Monetary Fund to Bulgaria regarded the expenditure policy line of the Bulgarian cabinet. According to IMF, in 2016 Bulgaria has to impose a stricter control over government expenditures, in order to meet its fiscal targets and reduce the country’s budget deficit to 2% of the gross domestic product. The International Monetary Fund contends that Bulgaria missed the opportunity to accelerate the budget consolidation in 2015, despite the higher revenues collected by the state treasury this year. Preliminary estimates show that the country’s budget deficit would reach 3.3% of the GDP in 2015. The Bulgarian authorities have recently justified the bigger expenditures this year with the necessity to finance some European projects, as well as with the failure of given ministries to curb their staff expenses. In fact Bulgaria’s Finance Minister Vladislav Goranov recently admitted that despite the recommendations of the state authorities, some departments missed the opportunity to fulfill that policy.

This was proved by the recent protests of employees from the country’s Interior Ministry. As a result, Bulgaria’s authorities stepped back and kept all social benefits of the ones employed in that sphere. Moreover, the Ministry of Interior is to receive EUR 40 million more from 2016 state budget. The cabinet is planning to spend more on education and healthcare, too.

According to IMF Mission Chief for Bulgaria Michele Shannon, Bulgaria’s economy would register a moderate growth of 1.7% in 2015, which is close to last year’s figures. The good performance of the national economy is mainly due to the country’s exports and the better absorption of EU finds. IMF estimates show that in 2016 the country’s economic growth would be influenced positively by the strengthening local demand. On the other hand, the government debt has been on the rise in recent years and Bulgaria is now far from the low deficit levels registered back in 2009. The country entered the so-called debt spiral and the GDP/debt ratio went up to 27%. Despite the fact that the debt/GDP ratio is still among the lowest in the whole EU, Bulgaria should undertake balancing measures, in order to avoid future deterioration of this indicator, the International Monetary Fund advices. The IMF mission also accentuates on the main weaknesses of the national economy - power engineering, healthcare and pension system.

That is why the IMF recommends that Bulgaria should undertake new measures and manage more effectively the allotment of disability pensions, in order to curb the misappropriation of funds allotted by the insurance funds. According to data of the National Statistical Institute, the number of pensions with disabilities in Bulgaria increased threefold in the past fifteen years, which is very alarming.

The growing deficits at the National Electric Company pose a potential threat over the county’s economy and the IMF recommends that Bulgaria should take urgent measures aimed at reducing the negative balance in the electricity supply field. The IMF mission also advises Bulgaria to improve the business environment and fight corruption more effectively, which would influence positively the foreign investments to that country.

With regard to the banking sector, which was subject to serious criticism during previous missions, the IMF now announces that the transposition of the EU Bank Recovery and Resolution Directive this summer was an important step forward and its implementation is on track. The International Monetary Fund also assesses positively the country’s preparations for asset quality overview due in 2016. The Bulgarian authorities recognized the importance of a rigorous asset quality overview to strengthen confidence in the banking system, the mission of the International Monetary Fund to Sofia announced.

English version: Kostadin Atanasov