In October, Bulgarian interim Finance Minister Lyudmila Petkova held a press conference regarding the 2025 state budget and the medium-term framework for 2025–2028. The biggest surprise was the expert assessment, based on current policies and enacted legislation, which projected a nominal spending increase of BGN 18.1 billion in 2025. Such a significant rise, even as an expert projection, raises several questions:
- The medium-term fiscal forecast for 2024–2026, adopted with this year’s budget, anticipated a spending increase for 2025 of around BGN 6–7 billion—a reasonable growth rate in line with expected revenue growth. It remains unclear how this figure swelled to BGN 18.1 billion, which implies a year-over-year spending increase of over 22%.
- According to the finance minister’s breakdown, personnel costs have risen by BGN 4.4 billion, a nearly 25% increase from 2024. Such an increase is highly questionable given inflation rates of around 2–3% and the genuine need to optimize the administration. This breakdown also shows operational expenses increasing by BGN 2.5 billion, a more than 30% rise from 2024.
- The projected spending assessment presented here does not align with the country’s fiscal rules, specifically the spending cap (up to 40% of GDP), the spending growth rule (which should not exceed the growth of potential GDP), or the budget deficit threshold (3% of GDP). When these fiscal rules are exceeded, Finance Ministry experts are legally obligated to propose consolidation measures.
All this puts the state budget in the spotlight in the weeks leading up to the elections. It is clear that a spending increase of BGN 18 billion cannot materialize. However, let’s highlight a few policies and parliamentary decisions that place a strain on the treasury and could be reconsidered in the budget adoption process for next year:
- In March 2024, Parliament passed an amendment to the Higher Education Act mandating that funding for higher education must be planned at no less than 0.9% of GDP. For 2025, this would mean close to BGN 2 billion. This is one of the most fiscally problematic provisions in recent years, passed without public discussion, impact assessment, or justification. A solution would be to repeal this provision in the transitional and concluding provisions of the State Budget Act.
- In April 2024, Parliament adopted an amendment to the Defence and Armed Forces Act linking military salaries to the national average wage and setting additional criteria, ultimately leading to salary increases of 30–50%. In February 2024, a similar rule was applied to police salaries, further pressuring the budget. Both provisions should be revisited and could be modified in the State Budget Act.
- The rise in public spending on healthcare continues to be downplayed, with total funds exceeding BGN 10 billion in 2024. Meanwhile, private hospitals continue to spend public resources on medication without conducting public procurement. The latest attempt to address this was a bill introduced in Parliament in September 2024. These amendments could be adopted by year-end, alongside the State Budget Act.
- The government continues to subsidize electricity costs for businesses, covering price increases at the expense of the budget. This is based on a July 2024 parliamentary decision requiring the Council of Ministers to establish a program subsidizing electricity costs above BGN 180 per MWh. This policy could also be phased out with the budget’s adoption for next year.
These are just a few examples of parliamentary decisions burdening the budget. Evidently, during a period of political instability and shifting majorities, Parliament has been overly productive in passing provisions that mandate budget increases and long-term commitments to various sectors.
Additionally, it appears there are “implicit” agreements: some agencies behave as though they are assured of more funds without formal approval in the legislative or budgetary process. Most of these provisions are passed with little debate, often between first and second readings on some quiet afternoon in Parliament. Controlling state budget spending to fall within normal limits—i.e., a deficit of up to 3% and a clear medium-term consolidation program—requires a re-evaluation of these policies.
Continue exploring:
Unlocking Growth in Bulgaria: Medium-Term Goals After Election