Bulgaria: Fiscal Risks from State-Owned Enterprises

Selected Issues Papers, June 24, 2024

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State-owned enterprises’ (SOEs) economic and financial performance may have important fiscal implications.
The study evaluates related fiscal risks in Bulgaria from both aggregate and firm-level perspectives.
The low level of state-guaranteed debt of SOEs poses minimal fiscal risk.
Contingent liabilities could be a fiscal concern in the long term due to:
- the low profitability of major SOEs, and
- their inefficient resource allocation.
Given their crucial role in the production network, SOE inefficiencies likely negatively impact the overall economy’s productivity and competitiveness.
Liquidity and solvency risks are evident in several key SOEs.
These findings underscore the need for monitoring and improving SOEs’ financial performance.

Aggregate perspective:
- Low level of state-guaranteed debt => minimal immediate fiscal risk.
- Contingent liabilities remain a long-term concern.
Firm-level perspective:
- Major SOEs exhibit low profitability.
- Several key SOEs show liquidity and solvency vulnerabilities.
- Inefficient resource allocation at firm level transmits to lower productivity and competitiveness economy-wide.

SOE performance has implications across sectors explicitly mentioned:
- Energy sector
- Transportation sector
- Infrastructure
Relevant fiscal and financial dimensions highlighted:
- Arrears
- Contingent liabilities
- Debt service
- Liquidity
- Solvency
- Public enterprises management

Strengthen monitoring of SOEs’ financial performance to identify and contain contingent liabilities.
Improve SOEs’ profitability and resource allocation to mitigate long-term fiscal risks and boost productivity and competitiveness.
Address liquidity and solvency risks in several key SOEs through targeted financial and governance measures.

Subject: Arrears, Contingent liabilities, Debt service, Economic and financial statistics, Economic sectors, Energy sector, External debt, Financial sector policy and analysis, Financial statistics, Fiscal risks, Infrastructure, National accounts, Public enterprises, Public financial management (PFM), Solvency
Keywords: Arrears, Bulgaria, Contingent liabilities, Debt service, Energy sector, Financial statistics, Fiscal risks, Fiscal Risks, Infrastructure, Liquidity, Public enterprises, SOEs, SOEs’ financial performance, Solvency, State-Owned Enterprises, Transportation sector

Source: Bulgaria: Fiscal Risks from State-Owned Enterprises, Selected Issues Paper No. 2024/022.