October 25, 2019 / 4:10 PM / 4 months ago

UPDATE 1-Bulgaria targets balanced budget next year

(Adds details, background)

SOFIA, Oct 25 (Reuters) - Bulgaria will aim for a balanced budget next year while boosting public wages and pensions and earmarking more funds for education and healthcare, the finance ministry’s 2020 draft budget, published on Friday, said.

Bulgaria is currently running a budget surplus, but planned spending, plus a $1.26 billion deal to buy eight new F-16 fighter jets from the United States, will tip the country towards a budget shortfall of 2% of GDP in 2019, the ministry said.

Under the draft plan, the country, which is pushing to enter the two-year waiting room for euro zone membership, is seeking to keep balanced budgets through 2022.

The centre-right GERB government will aim to increase all public salaries by 10% and boost teachers’ pay by 17%, delivering on pledges to boost incomes in the European Union’s poorest member state.

The minimum monthly salary in the Balkan country, which hopes to bridge the income gap with richer Western Europe, will also see 9% increase to 610 levs in 2020.

“Maintaining fiscal sustainability and leading fiscal policy that improves the business environment, encourages investment and develops the labour market to boost growth and employment are our main goals,” the ministry said in a statement.

The planned increases are likely to keep domestic demand robust and offset an expected export slowdown. The finance ministry now expects economic growth to fall to 3.3% in 2020 from an expected growth rate of 3.4% this year.

The finance ministry forecasts a 7% increase in fiscal revenues next year to 46.8 billion levs. The 10% corporate tax rate, one of the lowest in the EU, will be unchanged.

The budget draft needs government and parliamentary approval.

In the draft budget, the NATO member state plans to increase funds for defence and is close to a deal to buy new warships and armoured vehicles.

Bulgaria operates under a currency board regime that requires its central bank to set interest rates and leaves fiscal policy as the only tool to influence its economy. (Reporting by Tsvetelia Tsolova; Editing by David Clarke and Jane Merriman)

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