By its decision, the government approved a draft law amending and supplementing the Law on the State Budget of the Republic of Bulgaria for 2019. The bill was drafted in connection with the acquisition of a new type of combat aircraft by the Armed Forces of the Republic of Bulgaria, which are of paramount importance for the national security and defense of the country, for the implementation of the NATO collective defense mechanisms and the common security and defense policy of the EU .
Pursuant to the National Assembly Resolution of 16 January 2019 and the Team for the Joint Control and Finalization of the Negotiations with the Government of the United States of America with the Prime Minister’s Order, negotiations were conducted on the different areas of airplane delivery and related equipment , documentation and services, and industrial cooperation. On the basis of the negotiations it was formally presented a proposal for concluding four separate contracts between the Republic of Bulgaria and the US Government for the acquisition of eight F-16 Block 70 fighters, weapons and related systems for long-term operation and maintenance as well as complete preparation of pilots and auxiliary personnel, subject to ratification by the National Assembly.

снимка: Lockheed Martin

снимка: Lockheed Martin

An essential point in the financial model of these contracts is the form of payment that provides for the estimated cost to be deposited in full shortly after their signature on the Federal Government’s account. Deposited funds will be used by the US Agency for Defense and Security Cooperation to make payments in the course of performance of contracts. The terms of the US Military Overseas Sales Program (FMS) allow, after the Ministry of Defense has transferred to the US Government’s account the amounts for the implementation of contracts for the acquisition of a new type of combat aircraft, some of which are deposited and investing through bank and investment accounts at the Federal Reserve Bank of New York to secure returns from these funds in favor of the Bulgarian state. The process of opening bills and transferring funds usually takes about 6 months. Implementing this option requires an agreement between the Ministry of Defense, the US Defense and Security Cooperation Agency, and the Federal Reserve Bank of New York, where the Bulgarian National Bank may participate as an agent of the state. The amount of funds that could be transferred in this manner will be determined by the US Agency for Defense Cooperation and Security (DSCA), with the Federal Government’s account having to maintain funds to cover current payments to the Agency for the project for 90 days. By default, funds are invested in overnight deposits and low-risk short-term treasury bills of varying timeliness.

Министерски съвет
This financial model for realization of the investment project “Acquisition of a new type of combat aircraft” requires additional costs to be paid over the approved by the National Assembly with the Act on the State Budget of the Republic of Bulgaria for 2019 which requires the drafting and proposing of a bill for its amendment and it is proposed to increase the amount of expenditures in the budget of the Ministry of Defense for 2019 by BGN 2.1 billion.
The projections of the draft law do not provide for a change in the new government debt limit and the approved budgetary restraints for 2019 remain unchanged as regards the maximum amount of government debt at 31 December 2019 and the maximum amount of the new government debt that may be taken in 2019.

At the same time, the bill also proposes a reduction of the state budget expenditures. It is envisaged that the funds planned for 2019 in the amount of BGN 271 million planned for the implementation of other modernization projects of the Bulgarian Army will not be spent this year.
Taking into account the net increase of the state budget expenditures amounting to BGN 1,829 billion, the bill on amendment and supplement to the State Budget of the Republic of Bulgaria Act for 2019 envisages an increase of the state budget deficit by BGN 1,829 billion to 2,228 billion leva.

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