Public Expenditure Management in an Indebted Country – Is Fiscal Consolidation Viable? (The Experience of Bulgaria in 1991-2004)
26 Pages Posted: 25 Mar 2012
Date Written: March 31, 2005
A highly indebted country faces severe problems in public expenditures management because it has to subject it to the priority of debt service. The experience of Bulgaria in the period 1991–2004 exemplifies how the difficulties faced by governments in managing public finances under a heavy debt burden have been exacerbated in the period 1991–1996 due to wrongly defined priorities and how the same problems have been solved since 1997 by implementation of rigorous restructuring on the expenditures side of the budget leading to successful reduction of the debt burden to a sustainable level.
The most important measures undertaken in the last few years with substantial contribution to fiscal sustainability are as follows: • Setting the target of maintaining a close to balance fiscal policy and subjecting all policies, budget expenditures management included, to its fulfillment; • Following a reasonable incomes policy subordinated to the fiscal target and forecasted revenues; • Restructuring the social security system, health-care and the education sector so that to reach a sustainable financial equilibrium; • Transferring the supply of some services to the private sector; • Transferring costs to the households.
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