July 12, 2019 / 10:39 AM / 5 days ago

Bulgaria to raise its fiscal deficit target over F-16 purchase

SOFIA (Reuters) - Bulgaria plans to raise its 2019 fiscal deficit target to about 2% of economic output from current 0.5% to finance a $1.26 billion deal to buy eight new F-16 aircraft from the United States, Finance Minister Vladislav Goranov said on Friday.

Goranov said the government will propose the change in the state budget on Monday. He pointed to a good economic outlook and budget performance so far which will allow Sofia to pay for the war planes in full. Funds have not been earmarked in the budget.

NATO member Bulgaria will also seek parliament’s approval for its biggest military purchase since the fall of Communism.

“Bulgaria can pay its dues on the deal in full. After the changes the fiscal deficit target will increase to 2%,” the finance ministry quoted Goranov as saying.

“I do not think that this one-time effort should be seen as a serious loosening of the fiscal discipline,” he said.

The new deficit target will still be below EU’s 3% threshold for fiscal shortfalls and is not expected to put the brakes on Bulgaria’s plans to join the precursor to euro zone membership, the ERM-2 mechanism, this year.

The Balkan country has accumulated a budget surplus of 2.6% of GDP through May mainly due to better tax collection. The finance ministry expects the economy to grow by 3.5% this year, up from 3.1% in 2018.

Bulgaria plans to finance the deal from its fiscal reserves, which stood at 11.3 billion levs ($6.50 billion) at the end of May. It also raised 300 million levs in government bonds in June to help fund it and plans to sell another 200 million levs in 20-year bonds on Monday.

Bulgaria plans to balance its budget in 2020.

($1 = 1.7373 leva)

Reporting by Tsvetelia Tsolova; Editing by Raissa Kasolowsky

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