Bulgaria's State fiscal reserve might shrink by BGN 2 B next year, according to the draft 2012 project discussed by the cabinet Tuesday.

According to the draft, the reserve cannot go below BGN 3B – in 2011 the listed minimum was BGN 4.5 B.

Current data of the Finance Ministry shows that by the end of August the fiscal reserve stood at BGN 4.9 B, meaning it there is shortage of funds in the 2012 budget, the cabinet could use about BGN 2 B.

The draft also provides for a budget gap of 1.35% of the Gross Domestic Product (GDP) or BGN 1.092 B.

In addition to the fiscal reserve, the State treasury can be financed by taking a new loan, but the exact parameters will be decided on next year, depending on the conditions of capital markets. The maximum new debt for 2012 is listed at BGN 4.2 B, meaning the total State debt could reach BGN 15.3 B by the end of 2012.

If needed the State could issue euro-bonds up to BGN 1 B.

The government is expected to approve the budget on October 31 after discussing it with the trade unions. When the cabinet gives it the green light, it will be tabled for debates in parliament.