Project managers of all projects are required to plan project costs in detail. At the state level, however, projects depend to a large extent on state bodies. Projects depend on many policies, and project managers often fall under the constraints of higher authorities.
The Minister of Finance and the Minister of Labor and Social Policy have denounced as cynics all project managers who claim that by increasing social spending in the 2022 Budget, the government is pumping up inflation. They did it during the meeting of the parliamentary committee on budget and finance, which reviewed the laws on budgets for 2022 of the state, the National Social Security Institute, and the Health Insurance Fund. To be fair, we will quote: “So the thesis that by investing less in social systems, it would lead to inflation and people would become poorer, sorry, but this is cynicism. The thesis that by helping the poor in the country, we will “Let’s raise inflation so much that it would impoverish is cynicism. Yes, inflation can reduce the effect of these funds, but certainly people will get much more than what inflation can take,” said the finance minister. Earlier, during the meeting, he declared: “As for social spending and the statement that it will lead to the impoverishment of people, the truth is that by raising social spending by BGN 2 billion, no matter how much inflation, it will not inflate USD 2 billion in social expenditures, it may inflate BGN 200 million, it may inflate USD 300 million, but not USD 2 billion. over 1.5 billion levs will certainly come in. That means it is absolutely social. ” Certainly this sacred phrase about cynicism will be heard from the rostrum in the plenary hall, when the State Budget Act will be considered in the first reading on Thursday.
Here I must immediately say that as far as cynicism is known in antiquity philosophical school, whose most famous representative is Diogenes, I personally do not see a problem to belonging to the group of cynics. Moreover, by definition, this philosophical school considers virtue as the only necessary condition for achieving happiness. So, when it comes to evaluating the budget proposed by the government, I am a cynic, as I maintain that both the social and capital expenditures provided for it generate inflation. And it robs me of my income, which, unlike those whose treasury guarantees an increase, does not come from the state budget. On the contrary, I am one of those who pour more than $ 800 in direct revenue and insurance into the revenue side of the Consolidated Fiscal Program (FSC) on a monthly basis, and more than $ 400 in VAT in the form of VAT on goods and services purchased by me. While those to whom the state intends to increase social incomes do not pay direct taxes to the state budget and social security contributions and hardly contribute to VAT revenues and half of the money they collect from me. But for me, who fills the coffers, inflation robs me (reducing the purchasing power of my income) and a large part of it is pumped by increased government spending. By the way, on the question of whether BGN 2 billion of social expenditures can be inflated, or in other words – devalued, the Minister of Finance was replicated by MPs. “Social spending is over $ 20 billion, and you will have inflation of about 10%, so it is not true that inflation will not eat up this increase in social spending that you have set,” he said.
Project Management references
Project managers and government budget forecast
In the Government’s Medium-Term Budget Forecast itself, which contains the reasons for the proposed state budget, there is indirect evidence of how inflation can eat up BGN 2 billion or more. It envisages that in 2022 the GDP will increase from 130.61 billion levs to 143.02 billion dollars. This is nearly 9.5% growth. But in real terms, again according to the government’s forecast, it is 4.8% or nearly twice lower than the nominal 9.5 percent. And rightly so, because the difference is inflation. And in monetary terms it amounts to over BGN 6.1 billion. Can inflation devalue $ 2 billion? Obviously it can. And another argument in this direction. In 2021, pensions have been updated to ensure that there are no pensioners below the poverty line. And as a result of inflation, has this goal been achieved now, or despite the update, are there still quite a few people whose pensions are below this limit?
Inflation is emerging as a major problem for the state, citizens, businesses and government. And as a person who has gone through two state bankruptcies, I will tell you from experience that it is a terrible thing. At first it seems harmless. At the end of 1995, it was at a record low of 29.5%. A year later, whether because of the policies of the then government or for other reasons, it exceeded 310 percent, and two months later, in February 1997, it reached 2,000 percent. That is why I, the cynic, do not want to experience such a nightmare for the third time. I do not want to see the current Prime Minister, like one of his colleagues from 1991 (Dimitar Popov), address the population with the appeal “For God’s sake, brothers! Don’t buy!” . And in fact who is the cynic in this case, I – the taxpayer who does not eat from the state treasury, but on the contrary – fills it, or those – with state salaries, who are trying to convince me that additional social spending 2 billion levs and more BGN 8.2 billion in capital expenditures will not increase inflation?
The very fact that this topic has become the main topic in the budget debate shows that the danger of a serious devaluation of income is not to be neglected. In the budget committee, it revolved around the BNB’s December forecast, which gave much lower GDP precisely because of higher inflation. The Governor of the Central Bank used all his diplomatic skills to extract this information from the political debate. And it worked out for him. But among the many financial and economic data he handled, the public heard only the phrase, “So there is no drama.” And Finance Minister Asen Vassilev was quick to say: “Annual inflation for 2021 according to the Harmonized Index of Consumer Prices (HICP) is 6.6%.” And the BNB had predicted 7.7%. However, according to the National Statistical Institute, there is another inflation, called the Consumer Price Index (CPI) and for 2021 it is 7.8%. Do you know where the difference with HIPC comes from? In the calculation of the CPI, the weight of foodstuffs and the maintenance of the dwelling – water, electricity, heating – is close to 49.5%, and in the HICP – about 36.3 percent. Everyone can decide for themselves which inflation is more applicable to our Bulgarian realities.
Assen Vassilev told the parliamentary committee that this is a budget that is aimed at investing in the main factors of economic growth. “There is a doubling of capital investment compared to actually made in 2021 to 5.2% of GDP. There is a significant increase in investment in human capital, basic health, education, but also a significant increase in budgets for sports and culture. as already mentioned, significant investments in social systems in order to improve the lives of people who rely on their income budget.
The main parameters are 2.5% deficit on a cash basis without COVID measures, with them it reaches 4.5%. Capital investment is 5.8% of GDP, which means that all increased social spending, all spending on education, culture and sports are covered by revenues. 1.7% of GDP revenues for capital investments remain. If we had made capital investments equal to what we receive as EU funds, we would have had a relatively small deficit of 1% or 1.5%. What we are betting on is a large increase in investment, which is financed from the national budget. And that’s why the whole budget deficit is due, “he explained.
Project managers advise to make investments
Investment is a good thing, even though it is pouring into inflation. Remember 2008. However, the question is whether they will happen in the planned amount of BGN 8.2 billion. Even MPs from the ruling coalition have expressed doubts about this. “I am concerned about the way in which capital expenditures are being absorbed, which are particularly large.”
The MP from “Democratic Bulgaria” Georgi Ganev approached in the same spirit. But he also looked for the good side in the possible non-fulfillment of the pledged investments. “I see opportunities for non-fulfillment of the expenditure part, because if the set capital expenditures do not happen, the budget is zero, there is no deficit, no new debt. Because we are ambitiously betting on capital expenditures, we have this deficit, but I think of them for 2021 will not be recorded in cash and the deficit will be lower, “Ganev said.
“In my opinion, the projected growth of the economy is overestimated and optimistic. The main engine of this growth is planned to be capital expenditures. BGN 8.2 billion and 5.8% of GDP are projected. Historically, such capital expenditures have not been utilized. In 2021 they were projected. 6.1 billion levs, and in the end only 3.7 billion levs were realized. has been sent, has not gone through the necessary public discussion, but by the middle of the year, and maybe later, this plan will not be adopted. “This plan can be relied on in advance for certain projects. So this main source of investment growth in 2022 is very uncertain, not to say impossible to contribute to real economic growth,” Ananiev said. .
His statement met with sharp opposition from Finance Minister Asen Vassilev. According to him, the investment plan did not rely at all on EU money under the National Recovery and Sustainability Plan.
“Will the capital program be implemented? Colleagues from the Ministry of Regional Development and Public Works assured us that they have ready projects for the full amount provided by the Ministry of Finance. The same was told to us by colleagues from the Ministry of Transport. capital expenditures is the NPVU, and this may be a remnant of the days when EU funds were the engine of capital expenditures, now of BGN 8.2 billion in capital expenditures, the NPV is BGN 1.6 billion and BGN 6.6 billion are national funds. we rely on Europe to fix our infrastructure, we take our own future into our own hands, and we say that the state budget has enough of its own resources to be able to fix our infrastructure, and the whole policy of capital expenditure is tied. It is not based on the principle “we can take as much money from Europe, let’s think about how to spend it”, but it is based on the principle “what we need as an economy, let’s find a way to finance it”. If we can’t with money from Europe, we will finance it from the national budget.
All those for more debt and debt spirals are groundless. The debt pledged in our budget is lower in terms of GDP than the one you pledged. And if we remove from the total debt the one we plan to take for capital expenditures, we are in a surplus of 1.7% in this budget. In reality, the additional debt we take is for investments, “said the finance minister.
This for the “future in their own hands” is wonderful. However, it is good to see what is written on this issue in the medium-term budget forecast of this same government. It says: “GDP growth will accelerate to 4.8% in 2022, driven by investment. Public investment will be supported by NPV funds. Private co-financing under the NPV will also stimulate private investment.” It may be cynical, but I am left with the impression that the EU funds in question under the NSAID are not so harmless to economic growth and cannot be so easily overlooked. As for the statement that if the investment plan does not happen, it will reduce the deficit and everything will be fine … I hope so. But won’t the increased social spending and inflation that eats the income of cynics like me remain? By the way, I am not at all against increasing the income of the socially disadvantaged so that they cover what they cannot pay such as utilities, funds, food and medicine. But I still think that these financial aids should be targeted – only for certain goods and services and really only for those who are below the poverty line, both in terms of income and wealth. That is why it is right to have benefits, not an increase, update or, as you will call it, pensions. So I think it will be fair and will generate less inflation. Nothing that may sound cynical.