Bulgaria threatened with bankruptcy, serious problems with maintaining fiscal stability.
There is a risk of a change in the existing exchange rate of the lev against the euro. Our accession to the Eurozone has to be postponed for an unspecified period of time. An IMF loan may be necessary to save fiscal stability. This will require serious financial restrictions. That situation would also lead to an income freeze.
Those are just some of the serious problems our country is facing. This information is part of a report by the Finance Minister Rositsa Velkova-Zeleva on the preparation of the budget, which BGNES possesses.
Urgent corrective measures of the financial policy are needed if the country is to avoid bankruptcy. The policy was set by the previous Petkov-Vasilev cabinet.
Under these circumstances, without taking consolidation measures, the following risks emerge:
1. Serious decline in the medium-term fiscal sustainability;
2. Changing the structure of expenditure in favour of fixed social payments and wages. Lack of flexibility to drop existing and implement new policies and programmes;
3. The risk of our country being included in an excessive budget deficit procedure is increasing. Based on forecasts of breaches of fiscal rules, which triggers obligations to take immediate, corrective measures, the failure of which could lead to sanctions by the Commission, including the suspension of EU payments.
4. Postponing the accession of the country to the Eurozone for an unspecified period of time or setting conditions for a change in the currently fixed exchange rate of the lev against the euro;
5. Probability of a downgrade in the country’s credit rating;
6. An increase in the cost of debt financing and difficulties in issuing external and domestic borrowing. This will create liquidity problems for the financing of budget expenditures, as well as a significant increase in interest costs for debt servicing. In this scenario, our country may need to borrow from the IMF, which will impose restrictive fiscal requirements as a condition for the loan;
7. If the outlined negative deficit trends continue, the possibility of approaching the upper limits of the debt criterion of 60% of GDP increases.