Part 26 (1/2)
BUDGET
The budget const.i.tutes the basic financial plan of the country's leaders.h.i.+p. It is the monetary expression of the annual socioeconomic plan and provides for the financial flows implicit in that plan. The budget is comprehensive; it takes into account all aspects of the economic, social, and cultural activities of the country. In line with the government's policy of gradually placing economic trusts and their branches on a self-financing basis, a progressively larger share of the funds budgeted for the economy is being retained by the trusts rather than channeled to the budget. The sums thus retained by economic organization rose from about 3 billion leva in 1971 to a planned level of more than 5 billion leva in 1973. Ultimate control over the use of these funds, nevertheless, remains with the government, and their disposition is subject to the provisions of the budget.
The national budget is formulated by the Ministry of Finance along lines dictated by the BKP leaders.h.i.+p and must be approved by the National a.s.sembly. As a rule only very minor modifications are made in the process of legislative review. Budgets for local governments are prepared as a part of the national budget; in 1972 and 1973 their total amount was equivalent to about 17 percent of the overall national budget. The Ministry of Finance is also responsible for ensuring the scrupulous implementation of the budget. It is a.s.sisted in this task by a nationwide network of state and local inspectors and by agents of the banks. Actual budgetary results are directly affected by deviations from the annual economic plan and therefore seldom, if ever, correspond to the original estimates, which have the force of law.
Systematic publication of budgetary data was discontinued in the mid-1960s. Since then only scattered figures have become available through press reports on the presentation of the budget to the National a.s.sembly and occasional articles by the minister of finance or other ministry officials.
The annual budgets have grown steadily larger. The approved budget for 1973 called for revenues of 7,057 million leva and expenditures of 7,035 million leva. In 1970 actual revenues totaled 5,723 million leva, the expenditures amounted to 5,650 million leva. Usually about 90 percent of budgetary revenue has been derived from operations of the economy, and the remainder has been raised through a variety of levies on the population. The largest single item of revenue--more than 30 percent of the total--has been collected in the form of a turnover tax on sales that has been pa.s.sed on to the ultimate consumer. The second most important revenue source has consisted of levies on enterprises in the form of a profits tax, a tax on fixed capital (interest charge) and miscellaneous other deductions from income. Social security taxes based on payrolls have been the third major source. Levied at a rate of 12.5 percent through 1972, the social security tax was raised by 20 percent in 1973 in order to meet rising costs. In 1972 about four-fifths of the turnover tax and two-thirds of the revenue from taxes on profits and capital was to be derived from industry.
In December 1972 the BKP Central Committee plenum embarked upon a gradual modification of the income tax system that would eventually lead to a total abolition of income taxes for wage earners and collective farmers by 1980. Initially, the existing system is to be improved by introducing unified taxation for all blue- and white-collar workers and collective farmers and by establis.h.i.+ng a tax exemption equal to the official minimum rate of pay. Gradual elimination of all income taxes for these population groups in the 1976-80 period is to be synchronized with the contemplated reform of wage scales. At the same time a system of progressive taxation is to be introduced on incomes derived from activities in the private sector that are not in conformity with the amount of labor invested.
The most complete recent information on budgetary expenditures is available from the approved budget for 1972. Out of a total outlay of 6,514 million leva, 3,224 million leva was earmarked for the national economy, and 2,065 million leva was set aside for social and cultural needs. The remaining undisclosed balance of 1,225 million leva, or 19 percent of the total outlays, must have included expenditures for defense, internal security, and government administration. The social and cultural expenditures included; social security payments, 1,054 million leva; education, 532 million leva; public health, 303 million leva; culture and arts, 83 million leva; and science, 93 million leva, in addition to 235 million leva to be provided by research organizations and economic trusts.
Information on the budget for 1973 was more sketchy. No information had been disclosed on the magnitude of the expenditure on the national economy; the usually undisclosed residual was therefore also not ascertainable. The increase in overall revenues and expenditures over those in 1972 was about 8 percent. Outlays for social and cultural affairs, however, were planned to increase by 11.8 percent, including increases of 18.8 and 15.7 percent, respectively, for public health and education. These figures reflected the government's announced program for increasing the well-being of the population.
The BKP and government leaders.h.i.+p look upon the budget as a major tool for executing BKP economic policies. As expressed by the minister of finance in 1973, the budget contains a whole a.r.s.enal of financial and economic levers--levers that must be used ever more skillfully to raise the efficiency of economic performance, to improve the structure of production and consumption, and to bring about a well-balanced economy.
The budget is also considered a tool for exercising effective control over the entire sphere of production and services, not only to ensure smooth current operations but also to inhibit any undesirable departures from official policy.
The disciplinary powers of the budget have yet to be more fully developed to cope successfully with the officially reported shortcomings in the economy. One step in this direction calls for the further intensification of what has been officially called financial and bank control through the lev, that is, the discretionary use of financial sanctions, including the denial of budgetary allocations or bank credits, to enforce strict compliance with specific plan directives.
Another advocated measure is to intensify the public campaign against waste and the irresponsible att.i.tude toward public funds and for tighter financial discipline. An implacable campaign is also to be waged against wrongs done to the citizens in the use of public funds, illegal formation and misappropriation of funds by economic organizations, irregularities in the supply of materials, failure to produce consumer goods despite the availability of needed resources, acc.u.mulation of excessive inventories, and pilferage.
Many apparent violations of economic and budgetary discipline arise because of the frequently inadequate knowledge or understanding by personnel at all levels of the economy of the constantly changing laws and regulations concerning the operation and interrelation of the diverse economic units, particularly in the area of finance. The changes in laws and regulations are the result of an unceasing search for a system that would provide effective incentives toward conscientious and efficient work to all gainfully employed persons.
BANKING AND CURRENCY
Banking
Since early 1971 the country's banking system has consisted of the Bulgarian National Bank and two semi-independent banks attached to it: the Bulgarian Foreign Trade Bank and the State Savings Bank. This banking system emerged after three reorganizations in the 1967-70 period and conforms to the general pattern of inst.i.tutional and management concentration in the economy. In addition to serving as the central bank of issue, the Bulgarian National Bank, an independent agency under the Council of Ministers, is directly responsible for financing all sectors and phases of the economy other than foreign trade and consumer credit, in which fields it supervises the activities of the Bulgarian Foreign Trade Bank and the State Savings Bank. The bank is also responsible for exercising close control over the economic units that it finances, with a view to ensuring the fulfillment of all national economic plans and the scrupulous adherence to existing laws and regulations.
A minimum of current information was available in mid-1973 on the structure of the banks, the relations.h.i.+ps between them, and their financial operations. Official statistics are limited to annual data on bank credits for investment and on the volume of outstanding short- and long-term loan balances for the banking system as a whole. Data on outstanding loans are broken down by type of borrower and, in the case of short-term loans, also by purpose. With minor exceptions, no information was available on the volume of loans extended, on loan maturities, or on interest rates after 1970. Statistics had also been published on the volume of personal savings in the accounts of the saving bank at the end of each year.
The total amount of loans outstanding at the end of the year increased from 3.6 billion leva in 1965 to 9.2 billion leva in 1971. The proportion of long-term loan balances rose from 24 percent of the total amount in 1965 to 40 percent in 1970 but declined to less than 36 percent in 1971. The increase in lending activity to 1970 was a direct consequence of the partial s.h.i.+ft from predominantly budgetary financing of economic activities to a substantial measure of self-financing by enterprises and trusts. The subsequent decline was related to the tightening of investment credit in an effort to reduce waste in the construction program (see Investment, this ch.). Long-term loans have been granted predominantly, if not exclusively, for fixed investment purposes.
Of the 3.27 billion leva in long-term loans outstanding at the end of 1971, 2.61 billion leva was due from state and collective enterprises, and 660 million leva was owed by private individuals who had borrowed to finance home construction. Only 12.5 percent of the loan balances was due from collective farms--an amount equivalent to barely 62 percent of the sums owed by private individuals. Collective enterprises in industry and services had outstanding loans of only 13 million leva. In relation to the value of each sector's fixed a.s.sets in 1971, the proportion of outstanding long-term loans was: state enterprises, 11.3 percent; collective farms, 16.1 percent; and collective artisans, 2.9 percent.
Nine-tenths of the short-term loan balances at the end of 1971 were owed by state enterprises, and one-tenth was due from collective enterprises.
Wholesale and retail trade accounted for 36 percent of the outstanding loans; industry and construction were each liable for 28 percent.
Short-term loan balances of agriculture amounted to less than 8 percent of the total sum, and balances of the services sector const.i.tuted less than 0.2 percent. The largest part of short-term loans was granted for working capital purposes, including the procurement of farm products. A balance of almost 1 billion leva, however, was outstanding on loans for the completion of building construction, including a small amount for housing.
A very small, though increasing, volume of consumer loans for the purchase of durable goods and clothing has been granted by the State Savings Bank. The volume of such loans--36.5 million leva in 1966, 48.2 million leva in 1967, and 45.4 million leva in 1968--was equivalent to slightly more than 1 percent of retail sales in the commercial trade network. The outstanding balances of consumer loans at the end of the year rose from 49.1 million leva in 1968 to 102.1 million leva in 1971.
Consumer loans may not exceed the sum of 500 leva and may be used only for the purchase of designated goods. In 1969 the authorized list included twenty-three categories. A sample survey in 1969 indicated that about two-thirds of the loan volume was used to acquire television sets, furniture, and motorcycles; another 20 percent was spent on radios, sewing machines, and scooters.
Apart from consumer loans, the State Savings Bank grants small loans to licensed private craftsmen for working capital and to collective and state farmworkers and other qualified applicants for the purchase of productive livestock, seeds, fertilizers, small tools, and other farm perquisites. The bank also makes loans for adapting premises to the needs of tourism; for current building repairs; and for meeting personal emergencies, including loans to newlyweds for the acquisition of furnis.h.i.+ngs. Depending upon the purpose of the loans, loan ceilings range from 150 to 800 leva, and maturities extend from ten months to eight years.
The volume of consumer loans was reported to have reached 116 million leva in 1972. Under the economic plan for 1973, the State Savings Bank was scheduled to make loans to individuals for the purchase of consumer goods and other needs in the amount of 203 million leva and for home construction in the amount of 180 million leva. The bank was also expected to lend 141 million leva to people's councils.
Loan funds of the State Savings Bank have been derived from personal savings deposits and, presumably, from interest payments. The bank also conducts state lotteries for the benefit of the state budget. There is no evidence as to whether the bank retains a portion of the lottery proceeds for its own operations. Savings deposits increased almost fivefold in the 1960-71 period to a level of about 3.6 billion leva--a sum equivalent to 64 percent of total retail sales or 150 percent of food sales through commercial and inst.i.tutional channels in 1970.
According to preliminary data, savings deposits rose by 630 million leva in 1972, and they were scheduled to increase further by 870 million leva under the economic plan for 1973. The bulk of savings deposits has been channeled into the budget.