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New rules on government secured loans and guarantees in Bulgaria


On 27 November 2015, the Bulgarian Council of Ministers (the "Council") adopted a new ordinance on investment projects financed with government loans or government guarantees (the "Ordinance"). The Ordinance aims to clarify rules on which projects are eligible for government financing, to comply better with provisions on state aid and to facilitate analysis of the planning of such projects in the context of the government's budget.

The Ordinance establishes new and specific requirements for ministries that submit proposals for state financing and guarantees. In addition to proposals, ministries must also prepare a motivational letter detailing inter alia:

  • the importance of the project;
  • the reasons why the project cannot utilize other sources of funding;
  • analysis of the impact of the financing on the respective ministry's budget and the government as a whole; and
  • the degree of readiness for completion of the project.

The Ordinance emphasises on the analysis of the project in terms of its financial and economic characteristics. Furthermore, the new Ordinance aims to achieve a clear separation between standard investment projects that fall within its scope, and investment projects which are regulated by special acts or which due to their specificity require new targeted legislation applicable to their financing and implementation. Since the approval of state loans and guarantees may be granted only once a year (with the approval of the annual budget), the Ordinance also implements the new possibility to adapt the approved grants in case of significant changes to the contemplated investment project.

The changes brought by the Ordinance will have particular impact on government spending in relation to its support for investment projects. The establishment of clear rules and guidelines on projects that receive government financing should in theory lead to a positive long-term effect on its expenditure habits.

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