The financial difficulties of the Bulgarian municipalities are mainly due to inefficient spending: Lyubomir Datsov

Lyubomir Datsov
Photo: BGNES

The overdue debts of the Bulgarian municipalities by the middle of 2017 amount to EUR 75 million. The latest report of the Bulgarian Ministry of Finance shows that some Bulgarian municipalities have scored excellent financial results, whereas others have incurred serious losses.

The Bulgarian Ministry of Finance published a statistical summary, rather than a detailed analysis, financial expert and former Deputy Minister of Finance Lyubomir Datsov told Horizont channel of the Bulgarian National Radio. In my view, many middle-sized Bulgarian municipalities are managed better and more efficiently as compared to the largest cities for instance. The information provided by the country’s Finance Ministry must be analyzed in details. Perhaps, the Ministry of Finance should provide data on an annual basis, rather than on a quarterly basis and give answers to questions asked by the ordinary people and the media.

Are the financial difficulties of some Bulgarian municipalities due to problems related to revenue collection or to inefficient spending?

According to statistical data, the structure and the share of the revenues of the Bulgarian municipalities is similar to the EU average. In other words, inefficient spending is behind the financial difficulties experienced by some Bulgarian municipalities. We must note that there are some huge differences in the financial results scored by Bulgarian municipalities with relatively similar financial opportunities and economic capacity. This is due to the efficiency of the local management and the quality of the local administration. Often, the political leadership consists of people who abuse their power and positions. Those problems are typical of the past 30 years or so and we continue to witness them nowadays.

Currently, six Bulgarian municipalities are performing a recovery plan. Can the mechanism of financial support through interest-free loans help those municipalities solve their problems or it would merely help them avoid bankruptcy?

It is still too early to make any assessments, because that mechanism has been functioning for around 1 year only. We must see concrete results first and how rigid the constraints of the Ministry of Finance are. This is a traditional mechanism used for financial recovery of municipalities and is a good idea. The question is how that mechanism will be implemented. In my opinion, the implementation of that mechanism is good and data of the Bulgarian Ministry of Finance shows that the financial indicators of those Bulgarian municipalities have improved. However, we also notice that the number of municipalities experiencing financial difficulties has risen, which should not happen, because the national economy has been growing steadily and all economic indicators have improved. On the other hand, that country has absorbed less EU funds in the past two years which also influenced the financial condition of the municipalities. Moreover, some Bulgarian municipalities have started to feel the consequences of the investments made in the previous programming period. Some mayors attracted EU funds on the territories of their municipalities without taking into consideration the fact that those projects may had been co-financed with EU money, but later they have to make a series of expenditures, so that the projects can continue functioning. For instance, some small Bulgarian municipalities built huge sports  halls on their territories, but they cannot afford to pay for their maintenance. However, those municipalities have to make huge expenditures, because such facilities have to be well-maintained. Otherwise, the municipalities risk reimbursing the money paid by EU finds if they fail to meet the requirements related to the sustainability of the investment. That problem will deepen in the future. Despite the fact that the Bulgarian municipalities have their own independent budgets, the framework set by the Ministry of Finance must be more stringent. In other words, the policy of soft budget constraints should be abandoned, because it allows some individuals to manipulate the local budget and finances for short-term purposes and then someone else has to pay their bills. On the other hand, the Bulgarian municipalities must have long-term vision of development. 

English version: Kostadin Atanasov
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