Bulgaria’s hidden debt in the insurance system stands at 242% of GDP

Lily Mircheva


“Bulgaria’s hidden debt stands at 242% of GDP,” said Dragomir Belchev, Financial Director at the Institute for Economic Policy during the "Hidden Debt in the Public Social Security System” international conference. Experts from the Hans Seidel Foundation calculated that the hidden debt averaged 200% of the GDP of each EU country and is 4 to 6 times larger than the official one reported by Eurostat and regulated by the Maastricht criteria.

"By 2040, the hidden liabilities of member-states are expected to exceed official ones 12 times,” predicted Emil Slazhak from the Warsaw University of Economics. The cost-oriented security systems of European countries, ageing populations and growing deficits in the 27 EU member-states are the main reasons for this situation.

In practise, the pension contributions of the people working now are used immediately for the payment of the pensions of current retirees, while workers themselves receive a promise from the State that they will also be ensured in old age. Just this promise is a future expense and contributes to the current debt of the State.

Currently, some 5% of the income of workers in Bulgaria, who were born after 31.12.1959, are allocated as personal contributions to individual accounts in the second pillar of the pension system and are not used for the payment of the pensions of the old people.

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