"Economic Policy Review" Bulletin ISSN 1313 - 0544

Public investments or fiscal consolidation after the COVID-19 pandemic in the recovery plans

The beginning of the Covid 19 pandemic brings upfront the debate over the questions regarding fiscal policy and the opportunities to stimulate growth via deficits. Through the unprecedented mechanism for Recovery and Resilience, the EU creates opportunities for all member countries to prepare their National Plans for Recovery and Resilience (NRRP) for which they will receive billions of euros in funding. In this way, the instrument allows each country to perform public investments, which if done without the help of the instrument, would’ve led to higher deficits and the need to increase national debt. Nevertheless, the overall aim is not only increasing public expenditure and thus stimulating growth, but also supporting structural transformation of the economies after the pandemic.

The performance indicators in the Recovery Plan Projects are not good enough in order to be assessed

Every project has to include indicators for an assessment – it is mandatory for projects in general, including these, which are submitted under the Plan for Resilience and Recovery. The choice of indicators depends on many things, but the most important thing for these is the possibility to provide opportunity for an evaluation of the project - whether it has achieved its goals and whether it has led to positive effects.

The Recovery Plan – another delay and new changes

Just when we thought that the National Recovery and Resilience Plan (NRRP), through which Bulgaria will receive 13 billion leva from the Mechanism for Recovery and Resilience (MRR), is finally ready, changes were made once again. The final (fifth) version was submitted to the European Commission (EC) in October 2021 (IME analysis), what followed was a leak of some of the EC's notes, a few public council meetings, organized by the Minister of Finance, reworking of the plan and another delay for EC assessment – until the 15th of April.

No advance payment to the recovery plan: now what?

It now seems almost impossible for Bulgaria to obtain advanced payment under the Plan for recovery and resilience. The amount of the expected advance is up to 13% of the total approved financial package for the country, or a little bit over 1.6 billion BGN. Why is this so? The regulation establishing the “Recovery and Resilience” mechanism clearly states that the Commission makes a pre-financing payment (advance) of up to 13% of financial contribution, provided that the Council adopts the implementing decision by the 31st of December 2021 (i.e., approves the plan and the request for payment).