Bulgaria’s Parliament OKs budget

SOFIA (Reuters) – Bulgaria’s Parliament gave a green light to the government’s 2004 budget late on Thursday after the ruling party ironed out fiscal differences with its junior coalition partner and the International Monetary Fund. The budget targets a deficit of 0.7 percent of gross domestic product from an initially planned 0.5 percent to reflect the European Union aspirant’s efforts to spur growth, while relaxing some taxes and raising incomes. The IMF, which has a two-year $300 million deal with Sofia that expires in February, had initially opposed the fiscal loosening but later backed it after the government pledged to compensate by balancing this year’s budget. The 2003 budget currently runs a surplus instead of an initially planned 0.7 percent deficit, and the current account gap is seen at 7.75 percent of annual GDP this year. The government has forecast growth of 5.3 percent next year, up from an expected 5.0 percent rise this year. The 2004 budget was in deadlock over the past month as the ruling party’s junior coalition partner, the ethnic Turks’ MRF party on which it depends for its slim parliamentary majority, threatened to block the budget due to planned cuts in agriculture subsidies. To avoid a government collapse, Finance Minister Milen Velchev agreed to lower the subsidy cut. Most of Bulgaria’s ethnic Turks and Muslims, who account for some 10 percent of Bulgaria’s 8 million population, make a living by farming and local analysts have said the MRF could not afford to disappoint its voters ahead of general elections in 2005. Under pressure from the MRF and trade unions, Velchev also agreed to reduce the lower bracket income tax, implement a bigger than planned corporate tax cut and hike pensions in 2004. He promised the MRF to spend 900 million levs ($573 million) from the government’s abundant fiscal reserve on infrastructure projects next year, but excluded them from the budget’s overall expenditure. This angered the opposition center-right UDF party, which on Wednesday threatened to challenge the budget in court.