Paving the Way for Euro Adoption

Paving the Way for Euro Adoption

The Minister of Finance Asen Vassilev presented the draft budget for 2024, which, according to him, allows Bulgaria to meet all the criteria for entering the Eurozone, which is planned for the beginning of 2025.

Initially, the stated intention was to present the project after the proposed changes in the tax laws passed the first reading in the parliament, to see what the attitudes are and then to calculate the expected revenues.

Now the plan is for the project to enter the National Assembly on November 22 and to go through the entire procedure before Christmas.

According to the Law on Public Finances, the deadline for submitting the draft budget to the National Assembly is the end of October of the previous year, but due to the local elections, the deputies postponed this deadline until November 15. The project is yet to be agreed in the Trilateral Cooperation Council and approved by the government. Earlier today, the “Podkrepa” trade union criticized the finance minister for the fact that his proposed changes in the tax laws were not discussed in the tripartite council. They were accepted at an extraordinary cabinet meeting on Monday, November 6, which was presided over by the finance minister himself in the absence of Prime Minister Nikolai Denkov and Deputy Prime Minister Mariya Gabriel.

According to the forecast, the gross domestic product (GDP) will reach BGN 205.8 billion, which is a growth of 3.2%. The assumed average annual inflation is 4.8%, which is expected to fall to 3% by the end of 2024. The deficit is expected to be 3% on a cash basis and 2.9% on an accrued basis. Public debt is expected to remain at its current level of 23.8% of GDP. The pledged revenues are 77.6 billion BGN, and the planned expenses – 83.8 billion BGN.

The budget is balanced within the framework of the Maastricht criteria and enables the adoption of the euro, the minister stressed.

Vassilevannounced that the project will be submitted to the National Assembly on November 22 and therefore expects it to be approved within a month after that. He pointed out that there are about 10 days until it enters parliament – time that can be used to calibrate so that it does not have to be reshaped significantly between the first and second reading. Revenue as a percentage of GDP is projected to remain at this year’s level of 37.7%, the same as this year, which is slightly lower than in 2022, when revenue was higher due to higher exports of expensive electricity, the minister explained.

The assumption of new government debt is not expected to exceed the total amount of BGN 48.9 billion or 23.8% of GDP.

In response to a question, the minister announced that the fees for “Gazprom” introduced in mid-October due to the transfer of gas through Bulgaria to Serbia and Hungary have been charged and are expected to arrive in the period 15-25 November, and the minister did not wish to reflect on whether they would come or not. “Let’s not speculate, we hope it happens,” he said.

Regarding the changes proposed in the Law on Local Taxes and Fees, which enables municipalities to update property tax assessments every 2 years, the minister clarified that his department is only a technical proponent of the request of the association of municipalities. He reminded that: “we are talking about local taxes that are administered and are in the income of the local government. We are technically the importer of the changes for local taxes, but they were made by the National Association of Municipalities and are in the hands of the municipalities. The changes in the law give municipalities the right to change the rates at their discretion,” he explained.

As is already known, the minimum wage is increased to 50% of the average amount for the previous year, or from BGN 780 at the moment to BGN 933 in 2024. The minimum insurance income is also raised to that extent.

Pensions will be increased as planned from July under the so-called Swiss rule. Teachers’ salaries are set at the level of 125% of the average salary. The forecast of the Ministry of Finance is that the average salary in the country will increase by 10-12% compared to its current level. In total, the state’s expenses for personnel will increase by a little over BGN 2 billion next year. They also include an increase in salaries in the administrations, which lagged behind the others. They will be increased according to the methodology of the Council of Ministers. For municipal employees, 370 million BGN have been earmarked for updating their pay.

He explained that this BGN 2 billion includes the year-round effect of the salary increase in some administrations, which was made from August 1, the growth of the minimum wage and funds that the Council of Ministers will distribute among the individual departments according to its methodology, so that the rather large wage inequality is overcome.

Education expenses are raised by BGN 590 million, which also includes the maintenance of teachers’ salaries at the level of 125% of the average salary. BGN 63 million has been earmarked for the statutory maintenance of children in kindergartens, over BGN 80 million is for textbooks, BGN 87 million is for the construction and repair of kindergartens and nurseries and the reconstruction of schools. BGN 57 million has been earmarked for new gymnasiums and over BGN 50 million for sports and art development programs at school, which are expected to benefit 1,200 art schools and 1,300 sports schools.

BGN 1.1 billion more has been invested in health care, as the growth of the average salary and the higher income from health contributions as a result also provide an opportunity for this.

The expenses for culture have been increased by BGN 50 million. A total of BGN 28.5 million is intended to finance the activities of libraries, museums, community centers and galleries, and they will receive this money for real activity, reported according to the methodology of the Ministry of Culture. BGN 9.3 million have been pledged for film production.

The defense costs included in the project are a little over 2 percent of GDP, and with them all the planned capital expenditures requested by the line ministry are secured, Vassilev explained. In addition to additional costs for salaries, but also for the protection of the state border with the construction of a radar system for low-flying objects and on the new system for checking ID cards with a chip, which, however, have not yet been introduced.

Copyright (c) Published with permission via Big News Network news agency

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Author: Shirley