Pensions will increase starting January 2007 instead of July 2007, Labour and Social Policy Minister Emilia Maslarova announced on October 23 during a visit by Robert Hagemann, head of the International Monetary Fund’s (IMF) mission to Bulgaria.

Hagemann came to Bulgaria on October 17 for a nine-day working visit to assess how the Labour and Social Policy Ministry is implementing an agreement with the IMF on the Government’s 2007 budget.

“There will not be a freeze on the highest pensions as some media already reported,” Maslarova told journalists after meeting Hagemann.

As of January 1 next year, the maximum pension will rise proportionately to the increase in the maximum contributory income and will be 490 leva. All pensions will rise from January according to the ‘golden Swiss rule,’ under which the annual inflation rate and contributory income growth influence the annual indexing of pensions equally, Maslarova said. This rule was introduced by law in 2005.

As for public sector salaries, Maslarova said that the minimum wage should rise to 180 leva a month next year. But the IMF responded by saying the minimum wage should not exceed 170 leva a month, the amount envisaged in the 2007 draft budget.

Earlier this month, during talks on the national pact for economic and social development, Maslarova received support from employers and trade unions to increase the minimum wage to 180 leva.

“That amount is not critical for the budget and will not trigger an increase in unemployment and inflation,” Maslarova said.

Maslarova told Hagemann that economic activity in Bulgaria had increased since the start of the year by 2.5 per cent. For the first nine months of 2006, the employment rate has come to 59.1 per cent. This was an increase of  2.9 per cent compared to the same period of 2005.

Hagemann learned from Maslarova that overtime and flexible working hours will be included in the main working wage. Maslarova also wanted to use the Unemployment Fund for compensation prior to retirement. Thus, people who have paid regular contributions, but who have one or two years before retiring and still drop out of the labour market, will receive monthly compensation instead of social assistance, Maslarova said.

The day for approving Bulgaria's 2007 budget is nearing. How the Government will spend the budget surplus accumulated over the past several years has occupied foreign and local Bulgarian-language media. The draft budget should be tabled in Parliament for discussion by the end of October and approved by the end of the year.

Bulgaria had to keep its fiscal policy tight next year while making sure its budget surplus targets are approved by Parliament, the IMF was quoted as saying by news agency Reuters. Bulgaria has intentionally underestimated budget revenues over the past three years to achieve significant fiscal surpluses, winning mixed praise and criticism from the IMF, Reuters reported.

In 2005, Oresharski set a target for a surplus of two per cent of gross domestic product (GDP). Later the surplus grew to three per cent. Those funds were unprecedented in Bulgaria's history, according to different analysts, who say the surplus has given politicians more room for manoeuvring and left ample funds for the Government to spend without Parliament's supervision.

“That is why we want to avoid a budget that has one surplus target and another one that is different with the IMF,” Hagemann told Reuters at the start his visit to Sofia.