Bulgaria unveils historic 51.4 billion euros budget amid concerns over rising debt and taxes

Bulgaria has published its draft state budget for 2026, marking a historic milestone as the country's first budget calculated entirely in euros before it enters the eurozone on January 1st, 2026. However, the landmark document has been met with sharp criticism from trade unions, employers, and financial experts who warn of unsustainable fiscal policies and insufficient reforms.

Record Spending and Mounting Debt

The Ministry of Finance projects total revenues of 51.4 billion euros and expenditures of 55.1 billion euros, creating a deficit of 3% of GDP - approximately 3.6 billion euros. The government is authorized to take on up to 10.5 billion euros in new debt, bringing the total state debt to 37.6 billion euros by the end of 2026, or 31.3% of GDP.

While this remains below eurozone averages, the scale of new borrowing has raised eyebrows. Of the planned debt, 3.26 billion euros is earmarked for the European SAFE instrument to strengthen the defense industry, reflecting Bulgaria's significant military modernization efforts.

The budget forecasts economic growth will slow to 2.7% in 2026, with average annual inflation holding steady at 3.5%.

Tax Increases Spark Business Backlash

Several tax changes have provoked fierce opposition from the business community. The withholding tax on dividends and liquidation shares will double from 5% to 10%, while gambling operators will see their variable tax rate increase from 20% to 25%. The excise calendar for tobacco products continues its upward trajectory, with further increases planned for coming years.

Most controversially, the social security contribution to the Pension Fund will increase by 2 percentage points from January 1, 2026, with another 1 percentage point hike scheduled for 2028. The minimum insurance income for self-insured persons will rise to 620.20 euros, matching the new minimum wage.

The Association of Bulgarian Employers' Organizations condemned these measures, warning they would trigger "a chain of irreversible processes" including investment outflows, increased shadow economy activity, deteriorating competitiveness, higher inflation, and slower economic growth.

Business groups also criticized the government for releasing the budget at the last minute, calling it a "deliberate circumvention of public dialogue" that undermines social partnership and proper consultation.

"Putting Out Fire with Gasoline"

Financial analyst Levon Hampartzumyan delivered a scathing assessment, comparing the budget to "putting out a fire with gasoline" due to its pro-inflationary nature. He argued that the government failed to articulate clear goals or explain the rationale behind key decisions.