In March inflation in Bulgaria hit a fourteen-year peak of 12%, data of the National Statistical Institute show. In one month only, consumer prices increased with 2.2%, transport costs rose by 7.9% and food prices went up by 3.3%. The price of hotel and restaurant services saw a 2.8% increase. Even before the latest price increase, two-thirds of Bulgarians said they were having difficulties to cover their day-to-day expenses, indicates data of a survey conducted by the NSI.

“Prices have soared since last week. Everything is expensive when you are poor”, a senior resident of the town of Vratsa says.

Bulgaria’s government is planning to announce a package of measures before the forthcoming summer amendment of the state budget, in order to contain inflationary pressure. “The biggest inflationary pressure comes from the supply chain and food and that is where a large part of the measures should be targeted”, Finance Minister Assen Vassilev contends. “The cabinet managed to avoid the increase of electricity price for household consumers. Now, the Ministry of Finance should come up with proposals to reduce VAT on bread, fruits and vegetables”, Premier Kiril Petkov said.

Economist Petar Ganev is skeptical of the introduction of such a measure. In his words, prices of books, children’s items and restaurant services have not decreased, although the value added tax was reduced during the Covid-19 pandemic.

“We warned that we would see a number of requests once opening the door for a preferential VAT regime on certain items – Georgi Ganev reminded. – The functioning model in our tax system is connected with lower taxes and proportional taxation. With regard to the value added tax, this means that we should reduce the VAT on all items instead of reducing the rate on certain items only.”

Bulgaria’s Minister of Economy Kornelia Ninova has proposed the introduction of a ceiling on energy and certain food prices. She also called for the introduction of a minimum tax-exempt amount. However, she has not yet received the necessary support within the ruling coalition.

“Let me ask those who are saying that the items will disappear from the shelves once a price ceiling is introduced. Why this is not happening in Spain, Romania, Greece and Hungary, where this measures has been in effect for months and no disruptions have been observed. As regards the proposal for a minimum tax-exempt amount, we have somehow forgotten that there are many working poor in this country.”

According to Petar Ganev, the introduction of a price ceiling on cooking oil, bread and other food items is impossible and manufacturers can redirect their produce towards other foreign markets. Petar Ganev forecasted that people, including pensioners, will be compensated for the loss of income and that the authorities will take measures aimed at boosting competition. “Hopefully, inflation will not exceed 14%-15%. It depends on the price of energy and how long the war in Ukraine will continue.”

“Bulgaria should continue compensating businesses for high electricity prices until markets become less volatile”, Ivaylo Naydenov, Executive Director of the Bulgarian Federation of Industrial Energy Consumers (BFIEC), contends in the context of Russia’s decision to cut off gas deliveries to Bulgaria.

“The state must somehow intervene – Ivaylo Naydenov contends. It is necessary to consider whether this should be done through the purchase of produce or overstocking- with grain for instance. I don’t know how the Agriculture Minister will offset gas prices.”

In his words, the industry needs guaranteed long-term gas supplies. “We must avoid buying gas on the day-ahead market, as we do with electricity. In Ivaylo Naydenov’s view, there will be competition for gas which will inevitably lead to higher inflation.”

Compiled by: Diana Tsankova (interviews by BNR-Vidin and BNR-Horizont)

English version: Kostadin Atanasov