Bulgaria’s Finance Minister Plamen Oresharski has said he saw no pressing need to revise the 2009 Budget, despite a flash estimate by the country’s statistics board that showed the economy shrank beyond expectations in the first quarter of the year.

Oresharski voiced his opinion in an interview with Bulgarian National Radio on May 17, just two days after the National Statistical Institute said that gross domestic product (GDP) was projected to contract by 3.5 per cent in January-March, compared to the same period of 2008.

Even though Budget revenue collection was lagging behind the Finance Ministry’s expectations, there were enough reasons to avoid a Budget reshuffle, he said. Revenue collection was down eight per cent, compared to the 10 per cent decline recorded in other European Union member states, he said, without naming the countries he was referring to.

Oresharski’s statement showed a drastic turnaround since mid-April, when he had reportedly urged the Cabinet to cut spending to reflect shrinking revenues and prevent a Budget deficit. "First quarter results bring forward the necessity of further cuts in public spending," he said in a report discussed by theCabinet behind closed doors on April 8, Reuters said.

At the spring meetings of the International Monetary Fund (IMF) and World Bank on April 26, he said that the Government was examining its available options, Bulgarian-language daily Dnevnik reported at the time. The newspaper quoted unnamed sources as saying that the Finance Ministry favoured freezing 20 per cent of the funds allocated to state institutions in the Budget, doubling the amount stipulated now, as a precautionary measure, rather than pinpoint specific areas that would lose their funding.

Bulgaria’s Budget surplus shrank to 514.3 million leva in the first quarter of the year, compared to the 1.71 billion leva recorded in the same period of 2008. For the first four months, the Budget surplus was about 600 million leva, Oresharski said. In 2008, the figure was 2.7 billion leva.

Overall, revenues fell by 5.1 per cent to 6.4 billion leva, while spending increased by 17.3 per cent to 5.64 billion leva. The balance is completed by a 248.3 million leva that Bulgaria contributed to the EU budget.

"We could still see an improvement in the second half of the year, but at this point I want to emphasise that the revenue decrease is not dramatic," Oresharski said. Bulgaria’s economy traditionally is at its weakest in the first quarter of any given year because of seasonal fluctuations, he said, adding that he did not expect the GDP to shrink as much in subsequent quarters.

Election mode
With elections for European and national Parliament scheduled for June 7 and July 5, respectively, the Cabinet has found it hard to resist the temptation to loosen the purse strings, especially for pensioners, a key demographic for the Bulgarian Socialist Party, the senior partner in the ruling coalition.

Earlier in May, the Government had squashed speculation that it could cancel the planned nine per cent increase in pensions as of July 1. The hike would take the total amount allocated for pensions in the second half of the year to 3.5 billion leva, according to data from the National Social Security Institute.

This is the second time pensions will be raised this year. Changes to the calculation methodology that went into effect in April resulted in a 10 per cent hike for 1.2 million out of two million Bulgarian pensioners, while another 300 000 received a smaller increase.

Addressing concerns raised by the central bank and international financial institutions, Socialist Prime Minister Sergei Stanishev said at the end of April that the Cabinet will consider spending cuts. However, that would not affect the funds earmarked for infrastructure, one of the key provisions in Stanishev’s economic stimulus plan, and social spending.

On May 19, Stanishev echoed Oresharski in saying that there was no clear evidence forcing the Government’s hand to revise the Budget. He has said previously that the Cabinet was more likely to cut the Budget surplus target to one per cent of GDP from its current target of three per cent, provided that the current account deficit continues to shrink, rather than directly reduce spending.

A day later, Oresharski said that the ministry would not revise the surplus target before the elections. The Cabinet would consider a possible revision, depending on the current account deficit data, at some point in August or September, he said.

Answering a question on the sidelines of a finance seminar in Sofia, he said that the ministry never contemplated the prospect of freezing more funds for state institutions. "I never had such an idea. We are observing the situation, but we will probably return to this topic in August or September," Oresharski said, as quoted by Bulgarian news agency BTA.