The Bulgarian National Bank (BNB) has expressed strong opposition to the draft state budget for 2025, which is set to be officially submitted to the National Assembly by the caretaker government. The central bank's position highlights several concerns regarding the proposed budget's parameters and its potential negative impact on Bulgaria's fiscal stability and long-term economic prospects.

The BNB argues that the proposed budget would significantly increase the state's role in the economy, with total expenditures under the Consolidated Fiscal Program projected to reach an unprecedented 46% of GDP—an all-time high not seen since 1998. This figure includes current budget expenditures, which are expected to rise to 38.2% of GDP, marking an alarmingly high level of spending. The central bank warns that this surge in expenditures, without accompanying measures for fiscal consolidation, could lead to higher taxes and social security burdens for both businesses and households.

According to the BNB, this shift in fiscal policy poses a risk to Bulgaria’s ability to adopt the euro in the near future. The proposed budget’s emphasis on increasing permanent expenditures and maintaining budget deficits near 3% of GDP raises concerns about the country’s fiscal sustainability. The BNB stresses that these developments could undermine Bulgaria's efforts to meet the Maastricht criteria, particularly the budget deficit and price stability requirements necessary for euro adoption.

The BNB also points to several revenue measures within the draft budget, some of which are one-off initiatives, such as a proposed tax amnesty. Other permanent measures, like increases in pension contributions, are seen as potentially harmful to the country's competitiveness, price stability, and long-term growth prospects. The central bank raises the possibility that these measures may not generate the anticipated revenue, especially if the international economic environment turns less favorable.

In its official statement, the BNB calls for timely and lasting fiscal consolidation, recommending realistic and sustainable budgetary measures that do not exacerbate inflation, pressure the labor market, or hinder economic growth. The central bank also warns that if the planned capital expenditures are realized without sufficient revenue generation, the country could exceed the 3% budget deficit limit, further jeopardizing fiscal stability.

In conclusion, the BNB's position underscores the need for caution in adopting a budget that balances necessary spending with fiscal discipline to safeguard Bulgaria's economic future, fiscal sustainability, and the goal of joining the eurozone.

BNB's full position can be read here.