Bulgaria has registered a budget deficit of BGN 1.514 B in the first half of 2010 as its revenue from VAT, excise taxes, and social security payments has failed to live up to the government’s projections.

This has become clear from data released Monday by the Finance Ministry. According to the 2010 Revised State Budget Act, which was adopted in early July, Bulgaria expects to end the year with a budget deficit of BGN 3.684 B, or 3.8% of its GDP.

This is well above the 3% threshold set by the EU Stability and Growth Pact. After Bulgaria completed 2009 with a deficit of 3.9%, the EU set the country under the so called excessive deficit procedure in order to stimulate government measures to bring the deficit below 3%. The draft 2011 budget provides for a deficit of 2.7%.

According to the Finance Ministry data published Monday, Bulgaria’s state revenue in the first six months of 2010 amounted to BGN 11.189 B, which is 45.6% of the amounted projected in the 2010 Revised State Budget Act.

Bulgaria’s total expenditures in January-June 2010 amounted to BGN 12.704 B, or 45.7% of the projections of the revised budget. These include the country’s payment to the EU budget. The expenditures are BGN 67 M smaller than in the same period of last year.

Over 78% of the state revenue came from taxes; it amounted to BGN 8.764 B, or 54.7% of the updated projection for 2010. The income from indirect taxes was about BGN 4.045 B, or 41.1% of the forecast amount. The income from VAT was BGN 2.253 B, or 43.1% the total VAT revenue planed for 2010.

Bulgaria’s Finance Ministry has explained the lower than expected revenue from indirect taxes with the slump of imports and the rise of exports registered since the beginning of the year.

The income from excise taxes in the first half of 2010 is only BGN 1.468 B, which is only 37.6% of the projected 2010 revenue, and there is no chance to make it up by the end of the year.

The state revenue from customs duties was about BGN 54 M, which is 58.5% of the planned amount for the year.

The sum raised from the collecting of social security and insurance payments is also behind with only 46.9% of the planned amount raised by the end of June, or a total of BGN 2.423 B. This will affect the finances of the National Health Insurance Fund and the National Social Security Institute, whose budgets will have to be subsidized with additional payments by the state budget.

Bulgaria’s social security and health insurance spending grew by 15% in the first six months of 2010 compared with the same period of 2009. According to the Finance Ministry, however, this is compensated with reduced spending for the administration and lower capital expenditures. The Ministry points out to the 15% reduction of the spending for the central government’s staff.

The current non-interest spending was BGN 10.774 B, or 50.6% of the amount projected for 2010 in the revised state budget. The capital expenditures amounted to BGN 1.267 B, or 33.4% of the planned amount for 2010. Interest payments were BGN 303 M, or 60% of the projected sum.

In the first half of the year, Bulgaria’s contribution to the common EU budget is BGN 358 M.

At the end of June, Bulgaria’s fiscal reserve amounted to the BGN 6 B. The reduction down from the previously announced figure is due to a payment of BGN 199 M to the European Investment Fund with respect to the start of the JEREMIE initiative designed to support small and medium-sized enterprises.

The Finance Ministry says that the reduction is temporary – until the European Commission reimburses the National Fund of the Ministry for the payment.

In December 2009, Bulgaria’s fiscal reserve was BGN 7.67 B, and in February 2010, it amounted to BGN 6.344 B.

The revised budget law allowed the spending of about BGN 2 B from the fiscal reserve in support of anti-crisis and social measures. However, the fiscal reserve cannot be smaller than BGN 4.5 B at the end of 2010.