Bulgarian fiscal zeal may lead to budget surplus for this year

SOFIA (Reuters) – Bulgaria, which runs one of Europe’s tightest fiscal polices, is officially aiming to end 2005 with a tiny budget deficit, but is more likely to have a surplus instead, its finance minister said yesterday. The EU candidate state concluded last year with a small surplus despite a pre-election spending spree by former King Simeon Saxe-Coburg’s centrist government that has angered the opposition and breached a pact with the IMF. After budget revenues overshot Finance Ministry estimates by 10 percent to reach 15.811 billion levs at end-2004, this year’s planned income of 16.167 billion levs would represent nominal growth of just 2.2 percent. Real GDP growth is projected at over 5 percent for 2005, and, though new tax cuts should lower revenues, Finance Minister Milen Velchev said a surplus was more likely than a gap. «Without having been unduly conservative, I would be more surprised if I see a shortfall than a surplus,» he told Reuters in an interview. Bulgaria is forced to keep a tight rein on state finances due to the currency board system binding its lev to the euro, which it aims to adopt around 2009, two years after EU entry. Last year, the government initially aimed for a fiscal deficit of 0.7 percent of GDP, but unexpectedly high revenues instead led to the surplus that hit a high of 1.26 billion levs, or some 3 percent of GDP, in November. That fell to 262 million levs after the government paid end-year bonuses to state workers and pensioners, and earmarked infrastructure funds, which the opposition slammed as election-year politicking meant to win votes before summer elections. The official 2005 budget target is for a 0.5 percent of GDP gap, but analysts expect a huge surplus.