Late payments by the government and by municipalities to the business sector shrunk by over BGN 60 M in 2011.

The major contributor for the decrease in late public sector payments was the government and the overall amount of the debt remains high at BGN 371 M by end-2011.

The government needs to pay invoices worth a total of BGN 164 M, while Bulgarian municipalities owe BGN 207 M.

One year earlier, the late payments by the public sector amounted to a total of BGN 432 M, of which BGN 237 M were to be settled by the government.

The amount of the delayed VAT payments due to tax inspections is BGN 350 M, which is a normal rate, according to officials of the National Revenue Agency (NRA).

The Bulgarian government's failure to meet its commitment to pay companies on time surfaced in the wake of the crisis, starting from the second half of 2009 and into the whole of 2010, when the Finance Ministry froze a number of payments to its contractors.

As a result, businesses started experiencing cash flow difficulties and began to delay payments for taxes and social security.

The Finance Ministry grew aware of the problem and started settling its bills in end-2010.

Apart from that, a law introduced in 2011 provided for a ceiling for late payments by public sector bodies.

The cap was set at BGN 556 M in 2011 and at BGN 369 M in 2012.

Bulgaria is also yet to introduce the EU's Late Payments Directive which provides for a 30-day limit for public bodies to pay private companies, with an upper threshold of 60 days for those exceeding this general principle.

The Late Payments Directive is to be introduced by March 13, 2013.