Assen Vassilev's draft budget hinders Bulgaria's eurozone entry and is fraught with risks

Assen Vassilev's draft budget for next year is full of risks of non-implementation. This is the opinion of the Bulgarian Fiscal Council, an independent advisory body on fiscal management.

Like a number of other experts, the institution believes that the economic forecast for the budget is "too optimistic" and that tax revenue projections are too high. This was eloquently stated by the European Commission on Wednesday in its autumn forecast.

According to the Financial Council, these inaccuracies would violate the rules for joining the eurozone - both in terms of inflation and deficit.

The institution's experts point to "serious challenges to the stability of public finances" that have already emerged around the Corona crisis with various types of aid that have subsequently become permanent. The Council also draws particular attention to the ever-increasing public debt, stressing that the interest costs on this debt will reduce the scope for investment and other productive spending.

The Fiscal Council is cautious about measures to stimulate the economy and increase revenue unless it is clear and explicit how compliance will be monitored. In the view of the Council, this will not be possible for some of them.

The institution also strongly disapproves of the proposal to confiscate all profits of state-owned enterprises (for the second year in a row), which limits their potential for development and higher profit generation in the future.

The Council also recommends that the draft budget be accompanied by a list of the most important projects that the government plans to implement and information on them as part of the capital investments.

It also condemned the lack of reforms to pension policy. An extra £2.5 billion will be allocated next year to cover a projected 11% increase in the state pension age from 1 July 2024.

The trend of increasing pensions continues, but without reforms to ensure the long-term sustainability of the system," the institution said.

The Council is also proposing to increase all exceptionally reduced VAT rates, such as those on restaurants, gyms, flour, bread, etc., to 20%.