Economic Policy Review ISSN 1313 - 0544

IME Survey: BULGARIAN GOVERNMENTS’ EXTRA EXPENDITURES 2000 – 2007

05.02.2009
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BULGARIAN GOVERNMENTS'

EXTRA EXPENDITURES

2000 - 2007

 

IME survey shows:

Bulgarian government likes to spend our wealth, especially when elections approach.

The positive results from the followed fiscal policy lead to unprecedented income to the national treasury that significantly exceeds the plan. Exactly this "unexpected" extra income lies at the base of the state's extra spending. In recent years the Bulgarian government always finds a way to spend more than what has been put in the national budget.

For the period 2000-2007 the total sum of the additionally approved budget credits totals a bit more than 6.5 billion leva. Broken down yearly, on average the sum is a bit more than 2% of the GDP. Almost 900 million leva of them have been approved by the so called Reserve for unforeseen and urgent expenditures. These funds are spent on structural reforms, on prevention and elimination of disasters' aftermaths, as well as for fiscal stability.

A larger fraction of the 6.5 billion leva, around 4.6 billion, have been suggested by the finance minister and approved by the Council of Minister. Information on the expenditures is rather skimpy and it is almost impossible to notice any results. Thus, the expenditures can be hardly defended.

The rest of the extra expenditures of around 1 billion leva have been suggested by the Council of Ministers and approved by the Bulgarian Parliament for 2007 only. Last year for the first time the finance minister suggested the Council of Ministers to be able to approve additional budget credits totaling no more than 1.5 percent from the planned income from the consolidated fiscal program for the year, and that required the vote of the Parliament. The procedure improved the transparency of the expenditures, but generally there are still no detailed reports.

It is an impossible task to trace all of the extra expenditures. Nevertheless, several facts attract attention:

  • The extra government spending is larger in years just before elections;
  • During the budget preparation the Bulgarian financiers are either incapable of doing the calculations correctly, or unwilling;
  • A large part of the extra funds have been provided to the Ministry of Defense - at least 151 million leva from the reserve for structural funds, and 246 million leva from the extra income in the national budget;
  • The larger part of the extra income in the national budget has been assigned to the Ministry of Health (335 million leva) and the Ministry for Regional Development and Public Works (280 million leva)
  • The Council of Ministers has been extremely generous to itself - it received 154 million leva from the funds approved by the Council of Ministers itself and suggested by the finance minister, which is even more than what the Ministry of Interior received (150 million leva);
  • More than 1 billion leva from the extra money have been assigned to the municipalities without any clarity on how they have been approved and what they have been spent on.
  • An enormous part of the extra funds for the prevention and elimination of disasters' aftermaths have been given to the municipalities. A small fraction of them have been assigned to the Ministry for Emergency Situations, causing serious doubts about the actual responsibilities of the ministry and about the need for its existence.

Analyzing the government's extra expenditures we can give the following recommendations:

  • The budgeting in Bulgaria should be based on the logic that it is not necessary to keep a large budget surpluses;
  • The economic processes should be taken into account realistically and objectively during the formulation of the national budget;
  • The spending of the extra funds should be totally transparent and it should be decided by the Parliament;
  • The finance minister should no longer be able to suggest the Council of Ministers the approval of additional funds (currently up to 1.5% from the consolidated fiscal program);
  • The spending of extra funds should follow clear policy and random expenditures in the end of the year should be avoided;
  • Pre-election expenditures should stop;
  • The spending of the extra funds should be tightly controlled thorough reports, especially on the funds given to the municipalities;
  • The surplus should be dedicated solely to financing of the transitional period toward privatization of the pension- and health-systems that need the resource;
  • The surpluses are generated mainly by the net taxpayers and it is normal that they receive it back - either through tax return, or simply through the reduction of the tax burden in the following years.

 

The entire survey is available here! (pdf) - in english