Bulgaria's public administration was too big and inefficient, creating obstacles in the way of economic growth, job creation and general prosperity, Sofia think-tank Institute for Market Economics (IME) said on November 11 2009.

"The bloated public sector is very inefficient – it can reach the same results with half the amount spent," the think-tank said in its annual presentation of an alternative Budget.

IME said that Government spending should be cut to about 25 per cent of gross domestic product (GDP), which would maximise economic growth. By reducing the tax burden on employees, the Government would allow them to save and invest more, the think-tank said.

IME's alternative Budget envisions sweeping reforms in a number of areas – including health care, education and the pension system – whose goal was to decrease Government spending while increasing the quality of services rendered by the public administration. Tax reforms would reduce Government revenue by more than five billion leva, or 19 per cent, compared to the draft 2010 Budget bill drafted by the Finance Ministry.

Government spending was envisioned to be 21 per cent, or 5.6 billion leva, lower than in the Finance Ministry draft, which would leave a 73 million leva surplus instead of a 466 million leva deficit in the state Budget.

"The alternative Budget redistributes 30 per cent of GDP, which a drastic drop from the current 40 per cent. The effects of a lower tax burden and increased efficiency of spending would be a faster and more energetic economic recovery, more investment and jobs, higher competitiveness and exports, rising incomes and the reduction of the grey economy," IME said.

IME's proposal envisions the complete overhaul of the pension system, which, it said, was systemically flawed. Employees should be given the choice of staying with the existing system and risk receiving low pensions once they retire or switching to a fully-private system, where 10 per cent of their income would be deposited in a pension account. The Government would thus remain responsible only for the pensions of current pensioners and people choosing to remain in the state pensions system.