THE International Monetary Fund (IMF) mission leader for Bulgaria, Jerald Schiff has advised the Bulgarian Government to set aside part of the consolidated budget surplus registered in the first half of 2003.

According to him, by doing so it could reduce the 2003 budget deficit from an initially planned 0.7 per cent.

The IMF experts have approved the extraordinary expenses, planned by the Finance Ministry in support of local municipalities and the National Health Insurance Fund.

Schiff arrived on November 12 in Sofia to finish the fourth review of the two-year stand-by agreement, as well as to discuss the Budget 2004 draft. He met Finance Minister Milen Velchev and introduced to him Hans Flickenschild, who will succeed Schiff in 2004. Both will stay in Bulgaria till November 25.

On the day when the IMF mission visit started, the parliamentary budget committee asked the Government to present new arguments on the planned increase of excise taxes on fuel, and more precise calculations of the effect of new tax rates on the budget. Fuel retailers said that the Government tax proposals would lead to exorbitant hikes of up to 12 per cent in the final prices. Velchev's argument for the new excise rates is that they aim at a gradual shift to EU excise levels.

The criticism of the new excise duties was initiated by opposition members of the budget committee.

The Budget 2004 draft is expected to be approved by Parliament by the end of the month or the beginning of December, in time to allow the Finance Ministry to draft more detailed expenditure plans for the local administration before the end of the year.

Velchev said that next year's budget priorities were the judiciary, health care and education, where the allocation will be respectively 44, 15.1 and 16.3 per cent up compared to 2003.

He said that the most important change to tax policy was the reduction of profit tax from 23.5 per cent to 19.5 per cent. In his view the expected enhanced tax compliance rate would compensate for the reduced revenues.