Bulgaria’s first budget in euros has sparked strong criticism from economists and opposition politicians, who describe it as the worst financial plan in more than twenty-five years. The 2026 draft budget, presented by the Zhelyazkov government, is being compared by experts to the economic failures of Zhan Videnov’s administration in the 1990s, which led to hyperinflation and a financial collapse. Now, critics warn that Bulgaria risks entering a long-term “debt spiral” with similar destabilizing consequences.

Further reading: €10.5 Billion Debt Bomb: Bulgaria's First Euro Budget Triggers Fierce Backlash

The Finance Ministry published the budget proposal late on Monday evening, missing the legal deadline by three days and leaving little room for public debate. The Association of Bulgarian Employers’ Organizations accused the government of deliberately bypassing open discussion on the document’s key parameters.

Mounting debt concerns

Under the proposal, Bulgaria’s external debt is projected to reach 37.6 billion euros in 2026, equivalent to about 31 percent of GDP. The ceiling for new borrowing in a single year is set at 10.44 billion euros. Projections show that total debt will continue rising - to 43.5 billion euros (34.2 percent of GDP) in 2027 and 49 billion euros (36.6 percent of GDP) in 2028.

The opposition party “Yes, Bulgaria” (part of the WCC-DB coalition) labeled this level of borrowing “record-breaking,” warning it could trap the country in a severe debt cycle. Economist Krasen Stanchev told Radio Free Europe that while the size of the debt is worrying, the bigger problem is its purpose. Instead of financing investments that would stimulate long-term growth, the government plans to use borrowed funds to cover growing expenses.

Central Bank Governor Dimitar Radev previously warned against this approach, distinguishing between “good” debt - taken to finance productive investments - and “bad” debt, which covers consumption or rising administrative costs without structural reform.

Rising costs and no reforms

The 2026 budget draft allocates substantial increases for public sector wages, especially in the security sector, without corresponding reforms. Salaries in the Ministry of Interior are set to rise from 3.8 billion leva in 2025 to 4.26 billion leva in 2026, while the Ministry of Defense will see an increase from 2.4 to 2.8 billion leva. These hikes follow previous increases of between 50 and 70 percent this year.

Financial expert Levon Hampartzumyan described the government’s approach as “trying to extinguish a fire with gasoline,” warning that such increases will fuel inflation. “You can raise salaries and expand administration, but at some point the bill comes due - and it must be paid,” he told bTV.

At the same time, there are no structural reforms aimed at improving public administration efficiency. Instead, new burdens are placed on the private sector. The dividend tax is set to double from 5 to 10 percent, and social insurance contributions for the pension fund will rise by two percentage points. According to economist Petar Ganev, these measures directly reduce disposable income for working Bulgarians without offering any guarantee of higher pensions in the future. He argued that the increases are not meant to address problems in the pension system but rather to cover higher public sector wages.

Pressure on businesses

The proposed budget also includes new regulatory requirements for companies, which the opposition has called an “attack on business.” One controversial measure would mandate all firms to use a single government sales software monitored by the National Revenue Agency. Similar attempts were made years ago with the SUPTO system but were abandoned after strong pushback from traders.

Opposition party “Yes, Bulgaria” warned that the government’s proposed deadline - less than two months before the end of 2025 - is unrealistic and would create chaos among businesses. The coalition WCC-DB said the overall effect of the budget is a “war on the middle class,” accusing the government of prioritizing state employees over private sector workers.

“This budget is nothing less than a gun pointed at business, where the middle class is forced to feed the army of bureaucrats,” MP Ivaylo Mirchev said.

According to Krasen Stanchev, the beneficiaries of the current draft are those working for or protecting the ruling elite - public servants, law enforcement, and defense employees - while the private sector bears the cost. “The advantages go to the Praetorian Guard of those in power,” he concluded.