Not dancing with the fiscal reserve!

The fiscal reserve is a tempting morsel. Simply put, it is money they have saved the Bulgarian governments in recent years, At the time the reserve is around 8 billion leva, which is given any unconsidered ideas. The most frequently heard comments also be used to fight the crisis, or just let them invest more freely in order to bring us a return. The fact that this reserve there is good news, but play around with it many hidden dangers.

Its development in recent years is quite interesting. During parliamentary elections in June 2005 Bulgaria’s fiscal reserve amounts to less than 5 billion economic boom in the coming years, and successful tax reforms have led to record revenues for the Treasury, which meant accumulation of surpluses and thus increase the fiscal reserve.
This increase, however, face serious problems every December when the ruling coalition and began untying the purse to indiscriminate spending. Suffice it to mention that only in December 2008 to lighten the reserve of over 3 billion Thus, reaching its peak on October 31, 2008 – over 12 billion, the fiscal reserve quickly fell to levels below 8 billion lv, where we find him in time. If the ruling coalition had fought a prudent policy, and there was every lurch December, when it could have fiscal reserve at the foot of a 15 billion euro.
Discussions about how to spend this reserve are also old. During 2001 – 2003 г. gaining popularity and is applied the idea of reserve money to be used more actively for the purchase of foreign debt
This policy meets the approval and economists as Richard Rahn, Warren Coats, Steve Hanke. Coats then argues that the management of fiscal reserves should be as transparent and should be limited to the following two options – Redemption of debt and reduction of tax and social security burden, ie the reduction in the seizure of money from taxpayers.
Not all, of course, such an opinion and then throw more ideas fiscal reserve to be funded government outlay. Ahmed Dogan (2003) proposed spending 1 billion from the reserve for construction of roads.
Over time, reduced its proposal to 500 million. On this occasion a comment article published by Warren Coats, in which he again presents his vision for the management of fiscal reserves, and expresses the opinion that the fiscal reserves in the world very rarely used for infrastructure projects and that in no case has a winning strategy.
Krassen Stanchev, and Georgy Ganev, independently of one another, express similar views, according to the role of fiscal reserves should be limited to:
1. Purchase of debt.
2. Namalyavanena taxes. 3. Reduce systemic risks, demographic and structural related issues such as pension and operation of the NII.
Since then the debate has not promenil.Pozitsiyata Institute for Market Economics remains the same – spending for the fiscal reserves for government projects or programs (during a crisis or not) is the most stupid and most will have disastrous consequences Hazardous investment of money the reserve is also very dangerous – this is money which serve as the guarantor of our country and hardly have to look for some profit from them. Not until we can use them for long-delayed and increasingly urgent reforms.
The external debt of our country was severely reduced in recent years and our focus is normal to fall on other applications of the fiscal reserve. When we talk about systemic risk and low taxes in the foreground somehow naturally go pension system. System whereby the state takes a large part of our income only on the promise that the future will receive a decent pension. These promises are starting to weigh more and the system is facing a complete collapse. Change of details, such as retirees, can only delay the inevitable, namely, that sooner or later the country will fail to fulfill their promises.
The alternative to this system is extremely simple and this is the system of personal retirement accounts. When it does not save everyone in the common pot, and in his own account and does not depend otnikakvi promises of politicians. In it, everyone will have a choice – where and how much to save, how to manage his money, when to retire and how to obtain a pension.
This is a system that everyone would prefer to move but it requires significant resources. Promises must be fulfilled, which means that the pensions of current retirees and those who have imported many years in the old system should be funded from elsewhere than from the contributions of the current generation.
Namely in the fiscal reserve lies the potential for this reform, which would have decided, perhaps the most serious social problem facing the country. The relationship between reserves and pensions has long been recognized and the coincidence is part of the reserve fund and silver where there are currently about 1,5 billion It is money that has been set aside because of the approaching fall of the pension system. At least when it is not clear how they will be used, but the options are roughly two – or will be spent on payment of pensions at some future date, without anything substantial to change the pension system, or will be used as a buffer and a guarantor in the conduct of pension reform and transition to personal retirement accounts. I think here the choice is clear.
The fiscal reserve should not be spent or invested and used to repay the foreign debt and the implementation of key reforms. This is the only solution that would have a real impact on the lives of every one of us.

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Peter Ganev, IME