Bulgaria's parliament approved on Wednesday a revised budget doubling the public deficit and raising the debt ceiling for 2014, to buttress the country against fiscal troubles after a bank failure. The new bill sees a deficit of 3.7 percent of output by year-end, up from the previous target of 1.8 percent, and greenlights the issuing of new debt of up to 4.5 billion leva (2.3 billion euros, $2.9 billion) by December 31.
Almost half the funds are to be used to pay out guaranteed deposits to clients of Bulgaria's fourth-largest Corporate Commercial Bank, which is facing bankruptcy. Some 3.0 billion leva will be raised from foreign banks like UniCredit, Citibank, Societe Generale and HSBC, while the rest will come from the local market, government plans showed. The EU's poorest member even seven years after joining the bloc, Bulgaria has had to struggle with prolonged political instability as well as meagre economic growth, deflation, rising unemployment and lower-than-planned budget revenues over the past year. It managed to avoid fiscal troubles thanks to an IMF currency board arrangement that ties its lev to the euro, and has one of the lowest public debt ratios in the European Union, forecast at 28.4 percent of gross domestic product at end-2014. But the new budget puts it above the EU's 3.0 percent deficit ceiling, which could see it coming under tougher surveillance and possibly sanctions from Brussels. Prime Minister Boyko Borisov's new right-wing minority government, which took office earlier this month, has vowed to bring down the deficit to 3.0 percent next year, while targeting 0.8 percent growth.