Bulgaria surplus wider
SOFIA – Bulgaria ran a budget surplus of 2.5 billion levs (-1.3 billion) from January to November, data showed yesterday, keeping the Socialist-led government on track to produce one of Europe’s tightest fiscal policies in 2006. The European Union newcomer’s budget surplus through November was 5.4 percent of projected 2006 gross domestic product (GDP), larger than the record-high 5 percent in the first 10 months, the Finance Ministry said. The Socialist-led government expects a surplus of 3.5 percent of GDP this year, compared to a surplus of 2.4 percent in 2005. For 2007, Bulgaria’s first year in the EU, it will aim for a surplus of at least 2 percent. Analysts expect the cabinet to approve large payments such as end-year bonuses to state employees and pensioners that will cut significantly into the fiscal overhang and bring it closer to the end-year target. Total fiscal revenues in the first 11 months stood at 18 billion levs (-9.25 billion). Spending was 15.5 billion and tax income, the largest revenue item, was 14.6 billion levs, the Finance Ministry said. The state budget, which makes up the largest part of the country’s consolidated fiscal program, showed a substantial surplus of 2.4 billion levs at the end of November. Sofia has agreed with its key economic mentor, the International Monetary Fund, to keep fiscal policy tight to help counter a huge current account gap, which is expected to swell to a record high 15 percent of GDP this year. Currency board Under the IMF’s guidance, Bulgaria operates a currency board that obliges it to keep a fiscal reserve aimed mainly at securing foreign debt payments. At the end of November, it stood at 6.7 billion levs (-3.45 billion). Under the regime, the poor Balkan state pegged its lev to the euro in 1997, leaving its central bank with virtually no power to influence the economy and making fiscal policy the key tool to counter external risks. Now widely considered the cornerstone of Bulgaria’s economy, the currency board has prompted successive governments to run up large, unplanned surpluses, mainly by intentionally underestimating revenues, even as public sector costs rise. But that practice has won mixed reviews. The International Monetary Fund has hailed the fiscal prudence, but critics say successive finance ministries have robbed taxpayers to let their governments spend freely without parliamentary oversight.
