The Ministry of Finance has unveiled the draft state budget for 2025, revealing a planned deficit of 6.4 billion leva, representing 3% of the country’s GDP on a cash basis. This figure is aligned with the goal of keeping annual expenses under 40% of GDP, which will be maintained through the 2025-2028 period. The draft budget includes provisions for municipal investments and specifies that VAT rates for restaurateurs, bread, and flour will remain at 20%, as they were after the Covid-19 crisis, which had temporarily reduced them.
The government aims for a gradual reduction of the deficit over the coming years, with the structural plan outlining a decrease in the deficit to between 2.2% and 3% of GDP until 2028. However, the budget for 2027 will see a deviation due to the planned purchase of military equipment. The inflation forecast for 2025 is 2.4%, with GDP growth expected to align with this rate in subsequent years.
In terms of fiscal policy, the maximum state debt for 2025 is capped at 59.8 billion leva, with newly assumed liabilities reaching up to 16.9 billion leva. Key amendments to tax laws are proposed, including a revised excise calendar and the reinstatement of mandatory VAT registration at an annual turnover threshold of 100,000 leva, down from the previous 166,000 leva. Additionally, steps to combat VAT fraud in the fuel sector, particularly concerning the use of unreported receipts, are expected to generate an additional 200 million leva in 2025.
As for expenditure plans, the ministry has indicated that salaries for state administration employees will increase by 5% in 2025, with specific exceptions for sectors such as the Ministry of Interior, the military, and education. The budget also includes a proposal for a 1% rise in social security contributions to the Pension Fund from 2027. The overall expenses for 2025 are set at 96.7 billion leva, accounting for 44.9% of GDP. The planned deficit of 6.4 billion leva, or 3% of GDP, aligns with one of the criteria required for Bulgaria’s eurozone accession.
The draft budget foresees continued gradual improvements in tax revenues, particularly through measures aimed at increasing fiscal control, such as the upgrade of the information system and enhanced risk analysis. A focus on transparency and predictability in the tobacco excise regime is also part of the long-term fiscal strategy. Other changes include the introduction of a new excise rate for tobacco and efforts to clarify the shadow economy related to fuels.
The expenditure side of the budget also includes provisions for several social programs, such as an increase in the minimum wage to 1,077 leva from January 1, and adjustments in social security incomes for self-insured individuals and farmers. A significant allocation of 617.6 million leva is earmarked for pension modernization, starting in July. Additionally, the salaries of teaching staff in secondary education will continue to rise, with an increase of 125% over the average gross salary for 2024.
In line with budget constraints, the government has prioritized strategic investment projects for the period 2025-2028. These projects, along with continued funding for the Municipal Investment Program, will help direct limited resources to essential infrastructure and development needs. For the first year of this period, the investments will be secured within the approved capital expenditure budget.
Until the end of 2025, the government debt is projected to reach 59.7 billion leva, approximately 27.7% of GDP, with an upward trajectory in the following years. The fiscal reserve for 2025 is planned to remain unchanged at 4.5 billion leva. Overall, the draft budget reflects the government’s commitment to fiscal stability, economic growth and strategic investments, while maintaining the balance required for potential eurozone membership. (Novinite)