Bulgaria’s central bank, the National Bank of Bulgaria (BNB), issued a strongly negative position on the proposed draft budget for 2025 on December 11, citing the significant increase in state spending and the risk that Bulgaria will fail to meet the inflation criterion to enter the eurozone.

The BNB’s position was unprecedented as it is not usual practice for the central bank to comment on the state budget plans. Its concerns were echoed by experts at the Institute for Market Economy, which described the budget as a “catastrophe”. 

The plan was released by the Ministry of Finance on its website and is set to be adopted by the caretaker government led by Prime Minister Dimitar Glavchev before being tabled to parliament for final adoption.

“The Bulgarian central bank expresses a firm position against the proposed draft budget for 2025 and its adoption. The planned parameters in the expense side of the budget envisage significant increase of the redistributive role of the state in the economy in 2025 amid planned budget spending under the consolidated fiscal programme equal to the unprecedented amount of 46% of GDP, which has not been observed since 1998,” the central bank said in its position.

At the same time, current budget expenditure is planned at record-high 38.2% of GDP.

“The lack of measures leading to sustainable fiscal consolidation that would be focused on limiting the high growth of the current budget spending increases significantly the probability of mandatory increase of tax burden for companies and households,” BNB added.

The central bank also noted the proposed budget violates the agreements the country has with the EU on the mandatory reserves the central bank should set aside from budget revenue.

The Institute for Market Economy also urged the authorities to reject the proposed budget. It issued similar objections to those of the BNB, and noted that the spending is planned to grow by a record-high 25% year on year amid expected inflation of 2.4% and economic growth of 2.8% in 2025.

The institute also said the budget would lead to drastic tax hikes and the introduction of new taxes, as well as higher spending on social security. That part also angered business associations and the trade unions.

“The adoption of the budget in this form means a total loss of competitiveness, a shocking signal for entrepreneurs and investors, a request for deprivation of Bulgarians' disposable income and a danger to the sustainability of public finances. This project should NOT be accepted! This budget should not be adopted – it leads to a catastrophe,” the institute wrote in comment on its Facebook page.

According to caretaker Finance Minister Lyudmila Petkova, the planned deficit is equal to 3% of GDP for 2025 despite a significant increase in spending on defence.