Bulgarian Government Approved Draft State Budget for 2026

The Bulgarian government has approved the draft State Budget for 2026, the government press office announced on November 13.

The budget forecasts economic growth of up to 2.7% in 2026, with average annual inflation at 3.5%.

The 2026 budget was prepared in line with Bulgaria’s first National Medium-Term Fiscal-Structural Plan for 2025–2028, which sets out policies, priorities, reforms, and investment plans over the medium term. The fiscal policy continues to prioritise long-term sustainability of public finances to strengthen confidence in the country and create a predictable investment and business environment.

In connection with Bulgaria’s planned adoption of the euro on 1 January 2026, all budgetary documents have been prepared in euros using the official exchange rate of 1.95583 (BGN) leva per euro in accordance with the Law on the Introduction of the Euro.

The projections for 2026–2028 reflect trends outlined in the autumn macroeconomic forecast for the national economy, including key assumptions and assessments of the impact of discretionary revenue and expenditure measures.

According to the macroeconomic forecast prepared by the Ministry of Finance, economic growth is expected to reach 2.7% in 2026. For 2027–2028, GDP growth is projected to range between 2.5% and 2.4%. Average annual inflation for 2026 is expected to be close to that in 2025 - 3.5%, before slowing to 2.9% in 2027 and 2.5% in 2028.

The budget balance under the consolidated fiscal programme (calculated on a national cash-based methodology) is projected to show a deficit of 3.0% of GDP in 2026. Maintaining the deficit within these limits ensures the financing of a range of expenditure policies, supported by the corresponding revenue measures. The deficit for the “Public Administration” sector is also set at 3.0% of GDP for 2026.

Based on the assumptions for 2026–2028, public debt is expected to reach €37.6 billion (31.3% of GDP) in 2026, €43.5 billion (34.2% of GDP) in 2027, and €49.0 billion (36.6% of GDP) in 2028. The maximum amount of new debt that may be incurred in 2026 is projected at €10.44 billion, including up to €3.2 billion under the SAFE instrument for strengthening the European defence industrial base.

The minimum fiscal reserve is projected to stand at €2.4 billion by 31 December 2026.

For the period 2026–2028, revenues, grants, and donations under the Consolidated Fiscal Programme (CFP) are expected to account for 42.8% of GDP in 2026 and 40.5% of GDP in both 2027 and 2028. The increase in 2026 compared to the anticipated 39.6% of GDP in 2025 is primarily due to the introduction of new revenue measures and the expected effects of those adopted in 2025.

The government’s tax policy will focus on achieving macroeconomic and fiscal stability in the medium and long term, while ensuring the necessary financial resources to implement its spending policies. The main objectives of the tax policy for this period remain supporting economic growth, improving the business environment, combating tax evasion, and enhancing fiscal sustainability.

In forecasting tax revenues, the following proposed changes to tax legislation have been taken into account:

• Increase in the withholding tax rate on income from dividends and liquidation shares from 5% to 10% under the Corporate Income Tax Act and the Personal Income Tax Act.
• Expansion of the scope of goods subject to fiscal control, requiring advance declaration of transport data.
• Extension of the electronic tracking system for vehicles transporting high-risk goods.
• Introduction of mandatory electronic reporting of sales revenues through approved sales management software in commercial establishments, as certified by the National Revenue Agency.
• Continuation of existing tax measures, including the new excise calendar for tobacco products introduced on 1 May 2025, aimed at a balanced, phased increase in excise rates.
• Continuation of tax relief policies for children and children with disabilities throughout 2026.
• Provision of more favourable tax depreciation rules for electric vehicles.
• Introduction of a tax incentive recognising an additional 25% of research and development expenses for tax purposes under certain conditions.

From 1 January 2026, taxation on gambling will be increased, with the variable component under Articles 30(3) and 30(4) of the Gambling Act rising from 20% to 25%.

To ensure the sustainability of the social security system, the following measures are also planned from 1 January 2026:

• Increase in the pension contribution to the State Social Security Fund by 2 percentage points, with a further 1 percentage point increase from 1 January 2028.
• Increase in the minimum social security income for self-employed persons to €620.20.
• Increase in the maximum social security income for all insured persons to €2,352.

The expenditure parameters for the forecast period have been set in line with the budget’s capacity to finance policies, as well as the expected development of public sectors, fiscal objectives, and government priorities. Total expenditures under the Consolidated Fiscal Programme (CFP), expressed as a percentage of GDP, are projected at 45.8% of GDP in 2026, 43.6% in 2027, and 43.5% in 2028, with the increase in 2026 compared to the 2025 programme (44.9% of GDP) mainly reflecting the impact of expenditure policies, including measures implemented in 2025.

The main expenditure policies driving the increase in the budget for 2026–2028 are as follows:

• Increase in the minimum wage from €550.67 to €620.20, effective 1 January 2026.
• Adjustment of labor pensions granted up to 31 December of the previous year, from 1 July of the corresponding year under the so-called “Swiss rule” by 7.6%, equivalent to €491 million.
• Increase in child care allowances for children up to 2 years old from €398.81 to €460.17 for the entire period through 2028.
• Increase in parental allowance for fathers (or adoptive parents) caring for children up to 8 years old, from €398.81 to €460.17 for the period through 2028.
• Increase in cash benefits for unused maternity and parental leave from 50% to 75%, covering leave under Articles 50a, 54, and 53g of the Social Security Code for pregnancy, child care up to 2 years, and adoption up to 5 years.
• Increase in personnel expenditure by 5% in 2026, with sector-specific adjustments according to existing legislation.
• Growth in funding for delegated education activities, continuing the policy in 2026 to raise teachers’ salaries to at least 125% of the national average wage, aiming to attract young and qualified educators into pre-school and school education.
• Updating salaries for academic staff and personnel under Article 53(1) of the Higher Education Act in state universities and scientific institutions for 2026, reflecting legislative changes and the country’s 12-month average gross wage as published by the National Statistical Institute.
• Increase in healthcare staff salaries, including resident doctors, nurses, and midwives, with an additional €260 million transfer from the central budget to the National Health Insurance Fund.
• Increase in personnel funds for the Defence and Security sector in accordance with statutory requirements.
• Higher municipal budgets due to revised allocation indicators for state-delegated activities in culture, social services, healthcare, and other areas, with total budgetary transfers to municipalities set at €5.107 billion for 2026, an increase of €544 million compared with 2025.

Capital expenditure for 2026 is set at €7.76 billion, including €3.605 billion from national funding and €4.155 billion from European funds, including the National Recovery and Resilience Plan (NRRP).

The Municipal Investment Programme will continue, with the total maximum allocation for 2026 under agreements for projects listed in Annex No. 3 of the draft State Budget, including projects commissioned and implemented by district mayors in cities with administrative divisions, set at up to €920.3 million. Payments will be made through the Bulgarian Development Bank under conditions and procedures established by a Council of Ministers’ act.