The Government is preparing measures to increase revenue and curb spending with an expected overall budget impact of around EUR 2.2 billion, including EUR 750 million in savings from expenditure cuts, Finance Minister Galab Donev said Thursday on Nova Television’s morning show.
Donev said the budget deficit could not be addressed through additional revenue alone. The Finance Ministry is reviewing all expenditure, starting with capital projects, and is preparing to restructure inefficient units in the state administration. Funding for inefficient projects will be restricted, while spending on excessively large administrative structures will be reduced, Donev said. The aim is to redirect public funds towards more effective activities.
The Ministry is also proposing a one-off windfall profits tax. In determining the taxable amount, authorities will take into account whether higher profits resulted from investment, the introduction of new technology, improved organisation of work or business expansion.
Regarding banks, Donev said neither he nor ministry experts expect the tax to push up lending rates. According to figures he cited, bank profits have increased by 588% over the past five years. He described this as windfall profit and said Bulgaria’s accession to the euro area had released significant resources previously held as reserves at the Bulgarian National Bank.
Donev also argued that bank profits are generally distributed to shareholders as dividends, while lending is financed from other sources, including household and corporate deposits.
Asked about Bulgarian National Bank Governor Dimitar Radev’s warning that the tax could make credit more expensive and constrain economic activity, Donev said this was the Governor’s position rather than a collective opinion or decision of the central bank’s Governing Council. He said he would meet Radev on Friday. Donev said the Finance Ministry had studied the experience of other EU countries, including euro area members, where permanent taxes on banks’ interest margins are in place. According to Donev, those countries have not experienced the negative effects on lending and interest rates cited by critics.
For retail chains, a distinction would be made between profits generated by market conditions and increases resulting from business expansion, Donev said. The profit of a chain with 50 stores could not simply be compared with its profit after expanding to 100 stores, he added. Gains resulting from new technologies, improved organisation and new products would also be taken into account.
Asked whether the tax could discourage companies from raising prices, Donev said such an effect was more of an aspiration than something that could be guaranteed in practice. He recalled the taxation of windfall profits in the energy sector under the 2022 EU regulation.
In the security sector, the Government will seek greater spending efficiency while honouring Bulgaria’s NATO defence commitments, the Minister said. This would not rule out reviewing structures and redirecting funds away from inefficient activities.
Donev said he had spoken on Wednesday with Interior Minister Ivan Demerdzhiev about restructuring, reducing expenditure and redirecting funding towards activities that would improve public security. Staff not directly involved in policing and related functions would be cut, although the scope of the reductions has yet to be determined, he said.
Donev said the statutory deadlines for preparing the 2027 budget would be met. European Commission representatives will visit Bulgaria on October 5 and 6 to discuss the budget parameters. As a euro area member, Bulgaria must submit its budgetary framework to the Commission by October 15, after which the draft budget will also be tabled in the National Assembly.
He recalled that, because Bulgaria is subject to an excessive deficit procedure, the country must strictly comply with the net expenditure parametres set for each year.
Donev described the terms of the new government debt raised on Wednesday as “extremely favourable”. He said concerns that Constitutional Court challenges related to the budget deficit could hamper financing had not materialised. The Finance Ministry said Bulgaria raised EUR 2.25 billion on international markets in the latest transaction.
He also highlighted last week’s upgrade of the outlook on Bulgaria’s credit rating to positive. According to Donev, this was a positive assessment both of the economy and of the Government’s measures to address the excessive deficit and stabilise public finances.
On the taxation of homemade rakia, Donev said the proposed wording of Paragraph 38, currently under public consultation, would be revised to eliminate ambiguous interpretations. The intention was to restrict the sale in restaurants, guest houses and other establishments of rakia produced using unclear methods and of unknown quality because of risks to consumers’ health and safety, he said. “No one is going to go through people’s refrigerators in their homes looking for it,” Donev said, stressing that the Government was not targeting traditions associated with homemade rakia. Existing provisions of the Excise Duties and Tax Warehouses Act concerning sales would remain unchanged.
Asked about Lukoil’s profits, Donev said he had no information about the company’s current margin and referred the question to the Economy Minister and Deputy Prime Minister responsible for economic affairs. He recalled that the company’s windfall profits had already been taxed under the 2022 European regulation and said taxing the same reference years again would have no effect. The Minister linked higher fuel prices to the end of Russian oil imports and the switch to supplies from other sources. He said Bulgaria had given up its derogation earlier than required and that the difference in crude oil prices had fed through to retail prices.
Despite the increase, fuel prices in Bulgaria remain among the lowest in Europe, Donev said. He argued that comparisons should take into account both countries that continue to import Russian oil and those applying administrative price caps. “The euro as a currency is not to blame for the rise in prices,” Donev said. He accused the previous government of failing to adequately assess how prepared businesses and consumers were for euro-area entry and of not taking sufficient consumer-protection measures.
According to Donev, insufficient controls and inadequate measures against speculative pricing allowed goods and services to become more expensive. He said that in some shops and services “BGN 1 became EUR 1,” adding that without proper controls similar effects could have occurred with the introduction of any other currency.
Government Prepares EUR 2.2 Bln Package of Revenue and Spending Measures, Finance Minister Says THE NEWS FROM BULGARIA – NEWS AGENCY 2009-2025 2026-10-01 07:05:26
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