After two weeks of initial consideration, the government released for public comment a draft update of the State Budget Law for 2013, which generally provides for an increase in the deficit of 493.4 million levs. According to the report, because of the reduced forecast GDP growth of 1.9% to 1% per annum and improper revenue planning by the government of Boyko Borissov, as well as pledged tax revenues declining by 550 million levs: from 16.63 billion levs to 16.08 billion levs. The problems come mostly from the expected revenues from VAT and excise duty, Finance Minister Peter Tchobanov explained for the BANKER, after the conclusion of the joint session of the Parliamentary Committees on Budget and Finance and the Economy, Energy and Tourism on Tuesday. The expected shortfall, specifically under VAT, was 229 million levs, while excise duties – are seen to show a gap of 205 million levs. Shrinking revenue from other taxes is much less significant – 14.6 million levs less from corporate tax and 50 million levs less from income tax of individuals.
The main reasons for the expected lower revenue from VAT and excise duties is in the downturn in demand for goods and services on the Bulgarian market and the dynamics of imports and exports, which implies no higher revenues from VAT on importation. Meanwhile, according to the Ministry of Finance non-tax revenue is expected to increase to 262 million levs at the expense mainly of larger receipts from dividends from state-owned companies and earned by Bulgaria international lawsuits. Thus, the net value of the failure to meet 2013 annual budget revenue amounted to 293 million levs. It can be overcome with some effort by the administration to increase the collection rate of VAT. Apparently, the Finance Ministry and the government have decided to reinsure themselves against a failure in this area that seems very real.
On the expenditure side, 200 million levs more have been added. It is important to note that the money was not incorporated in the budgets of various agencies and is recorded as an increase in reserves of the government on unexpected and contingency costs.
As far as the debt is concerned, the budget was updated to allow the government to finance the budget with new bond issues without violating the requirement of maximum gross volume of placed issues in the 2013, which can not exceed 2 billion levs. However, only until the end of May, the newly issued bonds were worth 1.47 billion levs including a six-month government securities for 800 million levs, which in February the government of Boyko Borissov used to pay subsidies to farmers. It is clear that the remaining by end of the year free limit of 530 million levs is insufficient to provide the budget with liquidity flexibility, because it turned out that by law it does not increase with the volume of government T-Bills repaid. That is why the government wants to increase the annual limit by 1 billion levs – from a threshold of 2 billion to 3 billion levs, ensuring that this way it will not exceed the total amount of debt for which the limit is 14.6 billion levs. In any case, this measure will not affect the profit and expenditure side.
The overall impression of the proposed draft update is that in the profit and expenditure side the government is trying to build additional buffers, strengthening fiscal stability of the Treasury, to whose use is will not necessarily have to resort to. And whether the proposed updated deficit of 1.3 billion levs will be used at the end of the year, is also debatable. Let us recall that in 2010 the deficit was updated from 1.52 billion to 3.68 billion levs, and at the end of the year the actually reported deficit was 1.57 billion levs. So what is a really planned for the budget and what is written in the State Budget Act sometimes may turn out to be different things at the end of the year.
The BANKER
