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Bulgaria Ends April with BGN 213 M Budget Surplus

Date: 02.05.2010

Bulgaria, which runs one of Europe’s tightest fiscal polices, has ended April 2010 with a preliminary budget surplus of BGN 213 M, the finance ministry said on Tuesday.

“We expected that April will mark a turning point and will be indicative for the state of the economy and we were right,” Finance Minister Simeon Djankov commented.

“We hope that the most difficult months from the crisis are already in the past,” he added.

Bulgaria's budget deficit increased to BGN 1.67 B in the first three months of 2010 due to a fall in revenues and a rise in spending for social payments, the finance ministry said a day earlier.

The total gap for the first quarter accounted for 2.4% of the country’s gross domestic product (GDP), based on the government's latest forecast for 2010 GDP. The deficit grew by BGN 270 M in March alone.

The centre-right government, which swept to power after the July elections, approved last month an austerity package that would help fill a potential gap of BGN 1.6 B. It includes the introduction of a luxury tax, floating minority stakes in state-owned companies and a possible bond issue.

It will decide on Wednesday whether to increase value added tax (VAT), which now stands at 20%, by up to four percentage points to 24% in a bid to boost revenues and keep down the deficit.

The government has pledged to stick to a tight fiscal policy and keep the deficit below 3 % by the end of this year. Last month it was forced to froze plans to apply to join the bloc's exchange-rate mechanism over a larger than expected 2009 deficit caused by unaccounted procurement deals, signed by the previous Socialist-led cabinet.

The financially unaccounted procurement deals has increased the 2009 gap to 3.9 % of gross domestic product (GDP) from an initial 1.9 % under the EU rules.

The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Bulgaria's fiscal reserve decreased at the end of March to BGN 6.3 B from BGN 7.4 B over the previous month and BGN 8.3 B on an annual basis.

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