Bulgaria's government will target a budget deficit of 4.8% of gross domestic product, the country's central bank deputy Governor Kalin Hristov said in Bucharest on Tuesday in an apparent back-down on a commitment to keep the deficit much lower.

"Last week they (the finance ministry) have decided to target a deficit of 4.8% of GDP on a cash basis," Hristov told a financial seminar in Bucharest.

Hristov stressed that the deficit can be funded from local resources because the country has 9.5% of GDP fiscal reserves.

The center-right government, which swept to power after the July elections, has pledged to stick to a tight fiscal policy and keep the deficit below 3 % by the end of this year.

Last month it was forced to freeze plans to apply to join the bloc's exchange-rate mechanism over a larger than expected 2009 deficit caused by unaccounted procurement deals, signed by the previous Socialist-led cabinet.

The financially unaccounted procurement deals has increased the 2009 gap to 3.9% of gross domestic product (GDP) from an initial 1.9% under the EU rules.

Bulgaria's budget deficit increased to BGN 1.67 B in the first three months of 2010 due to a fall in revenues and a rise in spending for social payments.

The total gap for the first quarter accounted for 2.4% of the country’s gross domestic product (GDP), based on the government's latest forecast for 2010 GDP. The deficit grew by BGN 270 M in March alone.

The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Bulgaria's fiscal reserve decreased at the end of March to BGN 6.3 B from BGN 7.4 B over the previous month and BGN 8.3 B on an annual basis.