For years we have been hearing that Bulgaria is a "slightly indebted" country and that a debt of 20–30% of GDP is more than comfortable. Against this background, the idea of financing deficits, social measures and infrastructure with seemingly "cheap" debt seems logical. But when we talk about reaching levels around 30–33% of GDP by 2027, another question arises: what does this mean not for the next budget, but for the next decade?
At first glance, the figures are reassuring. Even with a debt of about one third of GDP, Bulgaria would remain below the EU average, where many countries have a debt of over 60, and some – over 100% of GDP. Accepting such values is often argued with the fact that "we still have reserve" and that it is better to finance reforms and investments with debt than with sharp tax increases. Thus, on an annual basis, deficits seem bearable, and society receives a signal that the state is "helping".
The real price, however, is rarely felt at the time the loan is taken out. It comes with time – in the form of higher interest payments and less freedom during the next crises. When public debt grows, interest expenses inevitably become a more serious item in the budget. Even with moderate interest rates, this means hundreds of millions of leva annually, which cannot go either for education, or for health, or for pensions, but simply serve to service the accumulated.
The higher the debt, the less space remains for maneuvers in the next shock – be it a new pandemic, an energy crisis, a war in the region or a sharp rise in interest rates. The moment the debt has already started to go up, any additional borrowing happens in a less advantageous position – investors become more sensitive to risk, and the state becomes more and more dependent on how it looks in the eyes of the markets.
The problem is not only in the number 30 or 33%. The problem is if these percentages are reached with chronic deficits, which finance current expenditure – salaries, pensions, temporary assistance – instead of investments that bring growth. If with "cheap" debt we close holes and do not build an economic foundation, in 10 years we will have more debt, but not enough higher income to carry it easily.
Another risk is political. When society gets used to the fact that deficits are "normal" and debt grows smoothly, any effort for discipline becomes unpopular. Cutting expenses or limiting additional social programs is interpreted as "deprivation", and not as an attempt to preserve the maneuverability of the budget. Thus, with each year it becomes more difficult to say "stop", and the inertia of the deficit turns into a permanent policy.
A debt of 30–33% of GDP in itself is not a tragedy. For a country with sustainable growth, good governance and clear priorities, it can be a manageable tool. But for an economy with demographic decline, systemic needs for reforms and dependence on external shocks, this level is a signal that the "buffer" is melting. After another one or two decades, space for new crises may remain much less.
That is why the real question is not "is 30–33% a lot". The question is: what exactly do we use each new unit of debt for and what trace does it leave behind. If today's "cheap" debt finances tomorrow's growth, jobs and higher productivity, its price is justified. If it only postpones difficult decisions and buys temporary comfort, the bill will come, and with interest – literally and figuratively.