BULGARIA'S BUDGET DEFICIT SHRINKS TO 1% OF GDP AT END-JULY

Bulgaria's budget deficit narrowed to 720.5 million leva, or one per cent of the country's gross domestic product (GDP), in the first seven months of 2011, compared to 1.23 billion leva, or 1.7 per cent of GDP, in the same period of 2010, Finance Ministry said on September 1.

The Budget deficit in July stood at 70.8 million leva.

Revenues rose by four per cent in annual terms to 14.12 billion leva up to July, accounting for 53.9 per cent of the annual target.

Receipts from value-added tax (VAT), which is the main contributor to total revenues, rose by 12.1 per cent to 3.45 billion leva, or 53.3 per cent of the annual plan.

Revenues from excise duties also increased in the seven-month period to 2.06 billion leva at the end of July, or 54.1 per cent of the full-year target. The Finance Ministry attributed the higher excise duties on alcohol and fuels to the requirement for fuel and wine and spirits producers to link their cash registers to the Customs Agency's servers.

Revenue collection is most efficient in direct taxes, with corporate income tax receipts rising by 91.6 million leva in nominal terms to 981.5 million leva, or 63.6 per cent of the full-year estimate.

Personal income tax revenues rose by five per cent, or 68.7 million leva, to 1.25 billion leva at the end of July, totalling 60.5 per cent of targetted revenue for the whole year.

Expenditures widened by 0.5 per cent over a year to 14.83 billion leva in the first seven months of 2011.

However, the breakdown of expenditure items shows a 17 per cent decline in investment expenditure to 1.22 billion leva and a 2.4 per cent increase in current costs to 12.76 billion leva.

The Cabinet's policy to trim investment expenditures at the expense of current payments has been criticised by observers because money is channelled to non-reformed sectors instead of being used in areas with growth potential, which ultimately stalls the economic recovery.