Economic Policy Review ISSN 1313 - 0544

Expenditures of the Triple Coalition in Bulgaria

Author: Petar Ganev / 04.08.2009
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Data on the execution of the budget in May were published a couple of days ago - this happened with some delay, which is hard to explain, especially just a few days before the elections (immediately this was interpreted as data are "bad" and this is why they are kept hidden). Well, data weren't hidden, but on the other hand you can hardly say they are something the government could be proud of.

What is disturbing is that the Bulgarian government has spent more than it has collected in May. Even more disturbing is that this is not due to some enormous cut in revenues (or because of mainly external to the government factors), but due to the record high (for a consecutive year) expenditures of the government. Here are the facts: in May this year, the government has collected around 160 million lv. less compared to May 2008. At the same time, in May this year the government has spent over 500 million lv. more compared to May 2008 (in both versions we are looking only at national budget excluding EU resources). Yes, revenues are really shrinking, but a leading role for the condition of public finance has the high government expenditures - for crisis, elections or something else.

Data give a good reason to look back in time and see what happened with public finance throughout the whole mandate of this government (starting from the elections in June 2005). For this purpose, we will use data on the fiscal reserve of Bulgaria at the end of each month during the mandate of the triple coalition. Simply said, when there is a rise in the fiscal reserve, then the government has collected more than it has spent, whereas when there is a decline in the fiscal reserve, then the government has spent more than it has collected.

Source: IME

The graph is quite expressive - in practice, year 2006, 2007 and 2008 present almost identical developments. A constant rise in the fiscal reserve throughout the year and then a sudden decline in December. Actually, we all remember this - accumulation of surplus during the year and then spending it in December. Things look very shocking in December 2008, when the fall in the fiscal reserve is with over 3 billion lv. One can clearly see how, in the first five months of 2009, the tendency the fiscal reserve to rise is now gone and it is at level of 8 billion lv. This is around 3 billion lv. more than the fiscal reserve during the election in June 2005, which was a little over 5 billion lv. However, if the Bulgarian government was reasonable and responsible, now in times of crisis and right before elections, as it was at the end of each year, then the fiscal reserve could have been over 15 billion lv., which is double the current amount. However, "Anti-crisis" (pre-election) expenditures changed things drastically.