Your source of expert economic & legal insights from Bulgaria and the region
You are reading a curated monthly selection of insights and analysis on the latest economic and legal policy issues from the Institute for Market Economics. All content is drawn from our Friday newsletter, which we have been publishing for longer than 25 years and has gained wide media coverage and a large readership in Bulgaria.
The cost of the budget deficit is getting too high
Bulgaria placed external bonds worth a total of EUR 4.35 billion. Distributed in three tranches - an 8-year issue of €1.75 billion, a 12-year issue of US$1.5 billion and a 20-year issue of €1.25 billion, this is the largest debt issuance the country has done in a single go to market. The bond sale was expected in recent weeks, in view of an upcoming debt principal payment in early September and the expected level of the budget deficit for 2024. The record deal will undoubtedly provoke polarised political and expert reactions, but the important thing is to refocus attention on budget balance and the health and sustainability of public finances. Read more
The local tax burden in our country has been growing noticeably over the last ten years
For more than ten years, IME has been collecting data from 265 municipalities in the country on the levels of key local taxes and calculating a?local tax burden index that?illustrates the extent to which businesses in different municipalities are burdened by taxes. The index includes the following four taxes: (1) Real estate tax for legal entities, which according to the Local Taxes and Fees Act (LSTA) can range from 0.1‰ to 4.5‰ of the tax valuation of the property; (2) Tax on the acquisition of property (transactional tax) for consideration, the rate of which may vary between 0.1% and 3% of the value of the property acquired, according to the MIPT. Read more
Water rationing: the failure of state governance
There is no other island of failed socialist ideas that so visibly affects the daily lives of citizens as the management of water supply and sanitation in Bulgaria. Regional cities in the third decade of the 21st century suffer from water rationing – yes, water supply is suspended for a large part of the day, and this does not spur a major national scandal, as if everyone has accepted this as the natural state of affairs.
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In short, we witness – and tens of thousands are not just observing, but directly enduring in their everyday lives – the agony of a combination of neglect of basic economic principles, denial of market incentives, and insistence on retaining complete state (municipal) control over water supply, sanitation, and sewage treatment activities. Read more
Vending machines, mobile pharmacies and affiliates instead of state-owned pharmacies
In late July, a?bill?was introduced in Parliament that briefly proposes:
The state to fund the opening of pharmacies, including 24-hour pharmacies, or the sale of medicines through vending machines in localities where there is a shortage of open pharmacies; Proposes an 8% reduction in the profit tax for those who open a pharmacy in a locality where there has been none;
In communities lacking a 24-hour pharmacy, it should be possible to place a vending machine to sell medicines. There are unfortunately villages and even entire municipalities that?lack a working pharmacy, and even fewer towns have a 24-hour pharmacy. So far, so good. As the proponents of the draft point out, the private sector does not have an incentive to open pharmacies in 22 municipalities – the population is declining and there are no pharmacists willing to open business in them. Read more
The real demographic problem is the significant and preventable mortality
The next elections are coming up and very soon we will again start listening to the politicians practicing on the regular topic of the demographic situation in our country and proposing measures for its quick solution. Of course, these processes do not have a quick solution, but moreover, it is usually not where the government is looking for it. The data show that it is not the promotion of fertility that is needed to relieve the demographic pressure, but a policy to limit the excessive and preventable mortality in Bulgaria. Read more
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