The Bulgarian government presented its draft budget for 2026 on June 24, setting a deficit of 5.7% of GDP, the highest figure in three decades, and immediately drew fire from opposition parties who accused the Cabinet of repeating the same fiscal practices it once condemned.
Deputy Prime Minister and Finance Minister Galab Donev outlined the framework to reporters, projecting revenues of 49.5 billion euros against expenditures of 56.8 billion euros. The resulting deficit amounts to 7.2 billion euros. Government debt is projected to exceed 30% of GDP this year, climbing to 33.2% in 2027 and 35.2% in 2028. The fiscal reserve, known as the Silver Fund, is expected to stand at 2.6 billion euros until the end of the year. The budget assumes inflation of 3.6%.
Donev said the 5.7% figure represented an improvement over a projected 7.4% deficit the Cabinet said it inherited, framing the draft as the first step in a broader stabilization effort. The government’s stated goal is to bring the deficit below 3% until 2028.
Capital expenditures for 2026 are set at 9.36 billion euros, including 4.2 billion euros in national financing. Municipalities are slated to receive 1.18 billion euros for investment programs, with an additional 600 million euros allocated on top of that. Donev said the increase in spending compared to the previous government’s draft budget stemmed largely from covering unpaid travel agency invoices and the municipal investment program.
On the revenue side, the draft includes a 30% increase in vignette fees and an expansion of the toll system, expected to bring in 53 million euros. The minimum wage would rise to 2,300 euros, projected to generate over 90 million euros, while higher minimum insurance thresholds for select sectors are expected to add another 40 million euros. Gambling intermediaries would face a new 10% tax, and salaries for board members at companies with majority state ownership are due for review, a measure the government values at 564 million euros. The existing mechanisms tied to minimum and average wage calculations would be scrapped, though officials gave no estimate for the fiscal impact, and a new mechanism for setting the 2027 minimum wage is still being developed.
Civil servants will begin covering part of their own social security contributions starting on August 1, under an 80/20 split this year that shifts to 60/40 in 2027. Officials said employees taking on this burden would see compensating salary increases. The Defense and Interior Ministries are exempted from the timeline for now, with separate mechanisms still under development.
Deputy Finance Minister Lyudmila Petkova said the government was also targeting Bulgaria’s shadow economy, which she put at 34.6% of GDP, concentrated in tourism, construction, trade, culture and entertainment, and agriculture. For now, she said, enforcement would rely on administrative measures: expanded fiscal control, monitoring of fuel supply chains, and mandatory e-invoicing for all local supplies starting next year. Petkova also said the government had identified ways to boost municipal revenue, including new taxation on housing, but did not provide specifics.
Speaking in parliament, Prime Minister Rumen Radev said the government did not plan mass layoffs in the administration without a substantiated analysis behind them, addressing expectations that the budget would trigger broad staff cuts.
Appearing on Nova television’s “Hello, Bulgaria,” Petkova framed the approach as “smooth stabilization” rather than shock consolidation, arguing that sharply raising taxes and cutting spending would carry steep economic and social costs. She said the imbalances driving the deficit built up over years through postponed reforms and unassessed risks, not decisions made in recent months. Petkova added that a broader administrative reform was in the works, aimed at reducing duplicated functions and merging structures, with effects expected to show up in next year’s budget.
The draft has triggered sharp criticism from opposition lawmakers, who argue the government is repeating the fiscal pattern it once denounced. Temenuzhka Petkova, an MP with GERB and a former finance minister under the Zhelyazkov Cabinet, called the draft “a budget of political hypocrisy.” She noted that President Radev had criticized the previous government’s budget when the deficit target was 3% of GDP, and asked whether he would now apologize given the new draft’s 5.7% target and a debt ceiling of 10.1 billion euros for 2026. Petkova said revenues in the new draft were roughly in line with the earlier Zhelyazkov-era projections, but expenditures ran 2.749 billion euros higher.
Krasimir Valchev, also of GERB and former education minister, said the steepest cuts fell on education spending, warning that the budget’s broader philosophy consumed growth potential built up in prior years without creating new sources of it.
Democratic Bulgaria MPs were similarly critical. Martin Dimitrov warned the draft violates a fiscal rule limiting state redistribution of funds to below 40% of GDP and could push Bulgaria toward what he called a “Romanian scenario” if the deficit wasn’t brought under control. Dimitrov said the proposed deficit was the highest since the period under Zhan Videnov, Bulgaria’s prime minister in 1995-1996 during the country’s hyperinflation crisis and a wave of bank failures, and higher than levels reached during the COVID pandemic or the Corpbank collapse. He also pointed to a debt withdrawal of 10.1 billion euros, more than the 10 billion euros planned by a GERB-led government for a comparable period, arguing the added liquidity would push inflation higher.
Dimitrov also cited figures showing 75,679 people in the public sector currently draw both a salary and a pension simultaneously, including more than 7,000 in law enforcement and 5,358 under the Civil Servant Act, calling for a phased dismissal plan for those positions. Ivaylo Mirchev, also of Democratic Bulgaria, told reporters the budget did not differ meaningfully from the framework Bulgarians protested against earlier, and that it left open the channels through which public funds continued flowing to related companies. The party wants the draft withdrawn and has called for financial discipline and gradual budget balancing instead of new borrowing.
Bozhidar Bozhanov, also with Democratic Bulgaria, pointed to healthcare as a major source of fund leakage, criticizing the lack of reform at the National Health Insurance Fund and stalled legislation on public tenders for private hospitals. Vladislav Panev said the draft lacked a clear long-term vision for the economy and warned the deficit created risks for both inflation and household savings.
Petar Vitanov, head of the Progressive Bulgaria parliamentary group, defended the budget from the floor, arguing it reflected “realism, responsibility and recovery” rather than the “fiscal illusions” of past years. He said the government inherited 2.2 billion euros in unsecured liabilities, nearly 2% of GDP, accumulated through projects announced without secured financing in 2024 and 2025. Vitanov said the European Commission’s excessive deficit procedure against Bulgaria stemmed from those earlier shortfalls rather than current policy, and noted that once a planned EU derogation for defense spending was factored in, the effective deficit would fall below 5%. He also defended the pace of adjustment, saying the budget implemented a fiscal correction of roughly 2% of GDP, nearly four times the standard rate the European Commission typically recommends.
The draft budget also includes a provision instructing Deputy Prime Minister Ivo Hristov to propose, until September 15, closing the Commission on Files and transferring its functions to the State Archives Agency. Dimitrov criticized the move as anti-reform rather than genuine change.
The budget is expected to go before parliament for adoption in July. A civil protest against the Radev government is planned for June 27, though it remains unclear whether Democratic Bulgaria will formally back the demonstration. (Novinite)