Bulgaria Increases State Debt by USD 3.4 B, Sets Deficit at 2.7%

Business » FINANCE | July 16, 2014, Wednesday // 15:28
Bulgaria: Bulgaria Increases State Debt by USD 3.4 B, Sets Deficit at 2.7% Bulgaria's Finance Minister Petar Chobanov argues the move is aimed at providing more flexibility to forthcoming governments. Photo by BGNES

The Bulgarian government should seek a new loan adding BGN 3.4 B to mitigate the impact of developments at the Corporate Commercial Bank (KTB), the government says.

Its latest move was agreed Monday during political consultations at Bulgaria's Presidency aimed at looking into options to manage the crisis.

After a budget overhaul was approved at a session of the Council of Ministers, Finance Minister Petar Chobanov proposed that the cap of Bulgaria's debt should be pushed up from the previous 1.8% percent.

A total of BGN 2.7 B will be set aside to stabilize the situation at KTB, which the Bulgarian National Bank (BNB), the country's central financial institution, plans to close down, also nationalizing its subsidiary Credit Agricole Bulgaria.

"We are leaving quite a big buffer to show that the state stands will all possible means behind the stability of the financial system, even in a situation when we do not have a functioning Parliament and have a caretaker government," public broadcaster BNR quoted Chobanov as saying.

A higher debt could also allow Bulgaria to boost expenditure in healthcare, where a deficit of nearly BGN 330 M (roughly EUR 165 M) at the National Health Insurance Fund (NZOK) is threatening the system's current operations.

The current account deficit could also go up by BGN 725 M, with BGN 225 M allocated to the NZOK.

Another half a billion BGN are to be slashed from the 2014 budget's income statement as income VAT revenues will be lower than initially projected.

President Rosen Plevneliev has insisted for weeks that failure to fulfill the income statement would create gaps worth hundreds of millions of BGN and this could pose a challenge to the interim government due to take over on August 6, as it will have no budgetary competences.

Chobanov, for his part, explained the government had decided to take the step only to provide "more flexibility" to the forthcoming governments.

Proposed amendments to the State Budget of the Republic of Bulgaria Act are now to be submitted to Parliament Committees and put forward for a vote as early as Thursday, Chobanov added.

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Tags: NZOK, Credit Agricole Bulgaria, BNB, consultations, KTB, Corporate Commercial Bank, Rosen Plevneliev, Petar Chobanov, budget, deficit, debt, State Budget of the Republic of Bulgaria Act
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