Bulgaria's Cabinet should tighten the purse strings and stop inefficient spending, which will not mitigate the impact of the global economic downturn, the Confederation of Employers and Industrialists in Bulgaria (CEIBG) said.

The Budget has a provision that 10 per cent of all Government spending is to be withheld as a buffer should tax revenue fall short of the target, but CEIBG believes that with tax revenue sliding, the size of the buffer should be increased, according to CEIBG chairperson Ivo Prokopiev.

Prokopiev is the main shareholder in Economedia, the publisher of Dnevnik daily and also the majority partner in Sofia Echo Media, the publisher of The Sofia Echo.

Unless it cuts down spending, the Government could be forced to raise taxes, which would rob Bulgaria of a major competitive edge, he said.

To alleviate some of the existing tax burden, the Cabinet should lower social security contributions by five percentage points and speed up the the procedures for refunding value-added tax, Prokopiev said. The state owed businesses 560 million leva in tax refunds, which now were a de facto interest-free loan from the private sector to the state and was not a fair practice, he said.

CEIBG plans to ask all political parties in Bulgaria to agree to a set measures that need to be taken to combat the crisis. The employers association hopes the document would serve as a guarantee of stability that should be implemented regardless of the outcome of the summer’s parliamentary elections.

One of the measures proposed by CEIBG is for a minimum threshold for foreign currency and fiscal reserves, which would guarantee that the currency board and the lev's peg to the euro exchange rate are preserved until Bulgaria’s entry into the euro waiting room, ERM 2.

Source: Dnevnik