Bulgaria’s caretaker government announced that it is looking into a windfall tax of up to 33% to drastically reduce the current budget deficit for the year announced just a few weeks before the elections.

While Bulgarians are set to go to the polls on 2 April in the fifth general election in the past two years, the Finance Ministry warns it may be unable to raise the necessary debt from the international markets due to deteriorating conditions.

To address this, the government is proposing a one-time 33% tax on excess profits for 2022 for all companies that are not state-owned as part of its new plan for the 2023 budget it presented Wednesday which will be tabled before the new parliament at the end of April.

If such a tax is not introduced, the currency board and even Bulgaria may be forced to take out a loan from the International Monetary Fund (IMF), Finance Minister Rositsa Velkova said.

“If there are no measures in the new budget law, the accounting deficit is projected at 6.9% of GDP. Together with debt refinancing payments, this means a need for new debt for 2023 alone in the amount of around €7.5 billion,” Velkova commented.

“Theoretically, there is a danger for the currency board with extremely high deficits,” Velkova told the media.

Bulgaria has been on a currency board for the last 25 years, with the exchange rate of the Bulgarian lev to the euro fixed at 1.9558 leva for €1.

The country was set to join the eurozone on 1 January 2024, though because of high inflation and the lack of political reform, its accession date has moved to 1 January 2024 at the earliest.