ECONOMY

Tax revenues take Bulgarian budget surplus to record levels

SOFIA (Reuters) – Bulgaria’s budget surplus swelled to a record volume in April and further inflated the ballooning fiscal reserve, as tax collection continued to significantly outperform government targets. The surplus rose by 40.4 percent to 673.1 million levs (345 million euros) at the end of April on a monthly basis, data from the Finance Ministry showed. In April 2004, the surplus was 528.9 million levs, and the country eventually ended up with a surplus of 659.2 million, or 1.75 percent of GDP, well over an original forecast of a small deficit. Bulgaria, which will hold general elections next month, aims to join the EU in 2007 and the eurozone about two years later, and it runs one of Europe’s tightest fiscal policies. The April data indicates that Prime Minister Simeon Saxe-Coburg’s government has already eclipsed its 2005 surplus goal – set in a March agreement with the International Monetary Fund – of 400 million levs, or 1.0 percent of GDP. The country’s fiscal reserve, required under Bulgaria’s currency board regime, grew to 4.87 billion levs at the end of April, from 4.42 billion the previous year. The government later significantly cut into the fund with a $1.6 billion expensive bond buyback. Saxe-Coburg agreed to tighten its fiscal stance, from an originally aimed for 0.5 percent of GDP deficit this year, due to the country’s troubling current account gap, which is expected to jump to 7.75 percent at end-2005. But some analysts now fear that the huge reserve, although a symbol of economic stability, could cause a fiscal swing if the June 25 elections lead to a Socialist-led government as expected. The Socialists have pledged to increase spending on education and healthcare and raise public wages. At its current levels, the fiscal reserve far exceeds the 2.5 billion levs required to keep the economy stable. The state budget, which makes up the largest part of the country’s consolidated fiscal program, showed a surplus of 623.6 million levs. Budget revenues stood at 3.87 billion levs, accounting for 37.1 percent of the 2005 plan. Spending increased to 3.24 billion levs, or 31.0 percent of full-year projections.