Addressing Parliament during the first reading of this year’s State budget bill, Deputy Prime Minister and Minister of Finance Galab Donev said that the 2026 budget is “bold but not reckless”.
The Minister said: “Despite all the accusations of a lack of vision, this budget actually demonstrates ambition and courage – the courage to present the state of public finances as it is, without tricks or sleight of hand that create false expectations, and the ambition to achieve fiscal discipline and stability through measures, reforms, and by plugging the visible ‘leaks’ and invisible ‘drips’ through which public funds are flowing away.” Donev was adamant that this budget does not yield to to the “temptation to distort reality”. He concluded that this budget is the important first step towards stability, predictability, and a budgetary balance.
Donev said that while this draft budget has faced the most severe criticism because of the size of the projected deficit, this excessive deficit has a history. According to him, the 2024 budgets suffered from a hidden deficit. H3 added that 5.7% is not the current government’s deficit, but rather the budget deficit, which reflects the accumulated deficits in public finance management over the past few years.
He outlined the expenditure and revenue categories contributing to this deficit. Commitments on the expenditure side already total EUR 3.268 billion. He continued: “To this, we add EUR 1.013 billion that will not be received on the revenue side, as they have already been accrued in advance as revenue for 2025. In total, EUR 4.281 billion of the deficit consists of old obligations, commitments, and advance revenue. This amounts to 3.4% of GDP.” The deficit for 2026, excluding the items described above, would be EUR 2.910 billion, or 2.3% of GDP, he said and added that these old liabilities, commitments, and advance revenues exist and cannot be removed from the State budget. Therefore, the deficit under the draft State Budget bill for 2026 is EUR 7.191 billion, or 5.7% of GDP.
Donev specified that this budget is based on the cabinet’s principles and is focused on reforms that have been postponed or thwarted, such as introducing mechanisms for linking wages to the average and minimum wages, setting deadlines for changes to the method of determining the minimum wage, planning the first phase of administrative reform aimed at structural optimization and reducing administrative costs, including a requirement for a 10% reduction in personnel costs, and the gradual elimination of accumulated overdue liabilities.
The planned maximum amount of new government debt that may be incurred during the year is up to EUR 10.1 billion, including a loan of up EUR to 3.3 billion to receive financial support under the SAFE instrument. These funds will be used to refinance debt and cover the budget deficit, including for pre-financing under the Recovery and Resilience Plan for the acquisition of shares, stocks, and equity interests. Public debt is projected to reach EUR 37.7 billion, or 30.1% of GDP.
Among the measures included in the draft budget, the Finance Minister cited an increase in the excise tax on tobacco products, a raise in the maximum social security income to EUR 2,300 effective August 1, an increase in the minimum social security thresholds by economic activity, and a 30% increase in vignette fees effective August 1. He also said that a requirement is being introduced for civil servants to pay their social security contributions, with compensation provided to ensure that their net income remains unchanged.
Donev stated that the bill, for the first time, realistically allocates EUR 1.108 billion for the investment programme for municipal projects, which had no funding in 2024 and 2025, leading to unpaid projects across the country. He reported that the funds for capital expenditures under the Public Investment Programme and European programmes are fully allocated at EUR 5.332 billion.
The deficit could be smaller than projected, depending on potential savings in European funds, said the Minister. He reported that the 2026 draft budget is already being implemented and the course has been set.