/ world today news/ Why is the state’s account not coming out lately?
It depends on what period we are looking at the government’s efforts – if they have to make a budget from today to tomorrow, as is the case with Budget 2016, they have no choice but to do it with the relevant government deficit and take out a loan. For it to be otherwise, there would have to be reforms in the previous years and mandates. There are none. And we also know that this government is not governing for the first time.
In its first mandate, Borissov’s cabinet made absolutely no structural reforms and substantial changes in legislation, and now it falls to them to adopt a budget with a deficit. According to my personal calculations, without claiming to be academic and 100% precise, it turns out that 5-6 billion BGN additional, in the form of debt, are needed per year by this government, with this management model.
Remember that last year they withdrew about BGN 16 billion additionally. They covered some old obligations with them, and the general opinion of people without special knowledge is that not all of their money was spent. But towards the end of October this year it gives the impression that our treasury is already “in the red”. And now they took out another EUR 50 million loan to cover current expenses until the end of the year. So with this complete blackout of information, it is not clear what happened and how with these 16 billion BGN. And for me, the need for these additional 50 million euros was too surprising. Add another BGN 5.3 billion from the 2016 Budget for the planned issue of new foreign debt, and the picture will become clear.
In this situation, the Bulgarian economy is increasingly beginning to be financed by debt. Some analysts and former rulers are right that we are heading for a debt spiral. Yes, they are factually correct, but the bitter thing is that precisely such people as Simeon Dyankov, as Plamen Oresharski notice it, since they were at the root of the problem. But if they had not seen it before, even though they had all the information available as rulers, their assessment should not be valid even now. And if they noticed the trend of indebtedness and did not do anything about it, then their behavior is already punishable. In both cases, they should be tight-lipped and even avoid publicity.
Can the trend for Bulgaria be reversed? Financiers in this particular case have no other option. So far – apparently not. There are big holes in the budget, our economy is not one of the efficient ones and it is becoming more and more inefficient, if you add the embargo from Russia, the losses in tourism… That’s how it is, a minus here, a minus there and finally – we raise the price of electricity, of vignettes … These are seizures not only from citizens and companies, but also from consumption in the country. You also know that foreign investment is decreasing with each passing year, and is currently at its critical minimum. There is nowhere to inject fresh resources into the economy to cover all government spending, so the obvious is done – a loan is taken out.
The question is – how long will it be like this, how long will we take out loans to live?
The trend can be reversed, of course, but not overnight. But if structural reforms are made within a year, there is hope. Things are not as complicated as they are described. GDP has its components – we look at them and decide which path to choose. Whether we will increase domestic demand or exports depends on the chosen approach, through which we will influence these parameters, so that we can report a smaller budget deficit a year from now.
For example, companies want to manufacture and export their products outside the country. Well, if you, as a country, raise the price of electricity for them – how will that happen? If they take out a loan and buy machinery, and the bank subsequently raises their interest rate, which increases their payment costs, how will this situation make them more competitive? No, it won’t make them competitive.
The problem with Budget 2016 is that there is no strategy.
And this is not from now – it has been for years. Why don’t they say – our priority is export. Then ask even a student of finance and he will tell you the steps that the state should take in this direction. If our strategy prescribes an increase in domestic consumption – it’s the same, we know what needs to be done. If we choose to attract investments as a priority – there will still be clarity about the path to take.
And then comes the elementary question – why don’t we have exactly such a strategy, unlike a number of others that we have that are gathering dust or are meaningless? Because its absence turns the 2016 Budget into a Wandering Budget, from which the Wandering Policy originates.
I explain this wandering with the understanding that if there is a strategy and reforms, the political price that the ruling parties and governments have to pay will be too great for them. If GERB had achieved these reforms during their first administration of the country, they would never have won the elections with such an impressive majority now. Because reform also means sacrifices. Look what happened with the Ministry of Interior. The cabinet tried to restructure some expenses – any person with a simple eye can see that this needs to be done. And what happened – the police came out in protest and GERB squatted.
Then we ask ourselves why the budget is like this… Yes, it will be like this, as long as the rulers do not want to affect their voters from certain groups in society and while they pay tax to their own populism.
With Budget 2016, we are certainly moving towards a Greek option. It’s a matter of years, it’s time to get there. Because the trends are easily picked up by the specialists, but since the elite rule by momentum, everyone who follows will take on more and more debt. The current ones in power borrow almost twice as much as the previous ones, and after them they will take twice as much debt as those. Thus the stone on our neck becomes heavier in a geometrical progression.
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Vasil Kendov, chairman of the Association of users of banking and financial services.
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