Fiscal Council: There is no problem entering 2026 without a budget

There is nothing unusual about the country entering a new year without an approved budget – the law explicitly allows for such a situation. Between 1992 and 1998, delays in the adoption of the budget were recorded six times, mainly due to economic and political instability in the country. Over the past decade, such a situation has arisen three times, according to an analysis by the Fiscal Council, which notes the possibility that, following the fall of the Zhelyazkov cabinet, the financial framework for 2026 may not be adopted on time.

If the National Assembly fails to adopt a new budget by the beginning of the year, the state does not stop working. Instead, the following temporary procedure is applied:

• State revenues continue to be collected under the same rules and laws that are currently in force;
• Expenditures may only be made to the extent that they were made for the same period of the previous year. In other words, if last year in January, 100 million leva were spent on a given activity, this year, without a new budget, no more than 100 million leva may be spent. In addition, expenditures cannot exceed actual revenues. The state can only spend what it has actually collected as revenue;
• Adjustments – if there are new laws or decisions that have already entered into force and require more or less funds, the state must comply with them;
• Fiscal discipline – even in this extraordinary situation, all rules for stable public finances (e.g., deficit limits and the debt rule) are observed;
• Public debt – The Council of Ministers may take out a new loan, but only to repay old debt that expires in the same year. In other words, new debt cannot be taken on for new expenditures, only to "roll over" old debt.
• How long can this continue? – This temporary scheme can be used for a maximum of three months. However, if no National Assembly has been elected (e.g., during elections), this period does not count.
• What happens after these three months if there is still no budget? – The National Assembly, at the proposal of the government, must take a special decision setting a new deadline during which the state can continue to collect revenue and incur expenditure under these temporary rules.

Historical cases in Bulgaria of budgets not being adopted on time

• State Budget Act for 2022

The reason for the delay in the SBA is that in 2021 there are several parliamentary elections and short-lived parliaments that fail to form a stable government. This delays the submission of the draft budget – the government changes at the end of 2021, leaving little time to prepare and submit the budget by the end of the year. As a result, the legal deadline (October 31) for submitting the draft budget is not met. Consequently, parliament adopts the 2022 budget on February 25, 2022.

Due to the delay in the budgetary procedure, the procedure provided for in Article 87 of the Public Finance Act is automatically activated. The law was published in the State Gazette, issue 18 of March 4, 2022.

• Law on the State Budget for 2023

The draft budget for 2023 was submitted by the caretaker government in April 2023, well after the official deadline. The main reason: the country had several parliamentary elections (at the end of 2022 and in 2023) and no permanently functioning government or regular parliament, which prevented the timely development and submission of the draft budget. As a result, the final adoption of the budget is delayed – the law is only adopted at the end of July 2023: first reading on July 12, 2023, second and final reading in the early hours of July 28, 2023.

The delay in passing the 2023 State Budget Act was mainly due to political uncertainty – elections, lack of a stable government and parliament – combined with financial and fiscal pressures (deficit, decline in revenues). As a result, the budget was adopted, but with a considerable delay, which created temporary challenges for the management of public finances and the implementation of state policies.

Unlike in 2022, a decision was made to introduce and vote on an extension law, which was adopted on July 28, 2023. The law was published in the State Gazette, issue 66 of August 1, 2023.

• Law on the State Budget for 2025

The delay in the 2025 budget is mainly due to political instability – multiple elections, coalition negotiations, and a change of government, which is a major obstacle to the timely submission and adoption of the draft budget. As a result, the state starts the year with temporary frameworks, and the final budget comes into force in the spring.

A decision is made again to vote on a separate piece of legislation, the Law on Revenue Collection and Expenditure in 2025. The Law on the State Budget of the Republic of Bulgaria for 2025 is published in the State Gazette – issue 26 of March 27, 2025.

Pros and cons of the delayed adoption of the budget?

Pros

• More accurate planning, mainly because the revenues and expenditures from the previous year are known. There is a clearer economic environment and up-to-date data on inflation;
• Unnecessary increases in expenditure are generally avoided. Since the budget is divided into twelfths, unnecessary expenditure is postponed, less money is spent, and therefore the temporary postponement creates conditions for temporarily better and tighter fiscal discipline;
• Coalition governments, which are the norm in most countries, are given more time for additional negotiations to reduce the risk of hasty changes and create an opportunity to increase support for the adoption of the budget;
• Weak governments produce weak budgets, and in such cases it is better to wait for a government with clear commitments and vision.

Cons

• Political instability erodes the overall environment;
• Negative signal to investors and credit agencies;
• Delays in public investment – weaker absorption of external financing (European funds), public procurement is halted and delayed, which has a serious and negative impact on investment, mainly on the launch of new investment projects;
• Funding to municipalities is delayed, and consequently their normal functioning and development;
• Social policies in relation to healthcare, education, the payment of benefits and pensions, and the management of revenues in the budgetary sphere as a whole are also delayed, creating additional social tension;
• Business uncertainty is increasing. This is a result of the uncertainty surrounding the expected changes in the regulatory framework, the tax and social security system, and state funding. All this is holding back business investment;
• Delays in the adoption of the budget may also lead to political deals that make it overly optimistic, thereby worsening the country's fiscal position and causing negative effects in many areas.

Regulation of the procedure

The legal procedure is regulated in Article 87 of the Public Finance Act (in force since 2014)

Article 87. (1) (Amended - State Gazette No. 43 of 2016) If the state budget is not adopted by the National Assembly by the beginning of the budget year, budget revenues shall be collected in accordance with the laws in force, and expenditures and transfers shall not exceed their amount for the same period of the previous year, up to the amount of revenues received, aid and donations, taking into account the acts of the National Assembly and the Council of Ministers that have entered into force and provide for additional or reduced budgetary resources, and in compliance with the fiscal rules under this law and the fiscal targets approved by the Council of Ministers in the medium-term budget forecast.

(2) (New - SG 43/2016) In the cases referred to in paragraph 1, the Council of Ministers may assume public debt for the refinancing of outstanding debt up to the amount of the annual repayments on the public debt assumed until the beginning of the relevant budget year.

(3) (Previous paragraph 2, supplemented - SG, issue 43 of 2016) The provision of paragraph 1 may not be applied for more than three months, not including the period during which no National Assembly has been elected.

(4) (Previous paragraph 3, amended - State Gazette No. 43 of 2016) In cases where the state budget has not been adopted within the period specified in paragraph 3, the National Assembly, at the proposal of the Council of Ministers, shall determine by decision an additional period for the collection of revenues, the incurring of expenditures, and the provision of transfers. With regard to the assumption of state debt, paragraph 2 shall apply accordingly.

Translated with DeepL.