A 250 million leva state budget subsidy will be granted this year to overcome the deficit in the pension fund of the National Social Security Institute (NSSI). The money would guarantee that the retirees get their pensions, Minister of Labour and Social Policy Lidia Shuleva said in an interview for the Bulgarian National Radio on Sunday.

The lack of social security contributions has led to a shortage of funds for the payment of pensions by the NSSI. At the moment, one employed person pays the pension of 1.1 pensioners and the social benefits of 0.9 unemployed persons, Shuleva said, forecasting that the fund would move into a surplus no sooner than 2005. Only then the ceiling on pensions could be lifted.

The number of employed people who do not pay social security contributions was rising constantly, warned Shuleva, adding that a subsidy of 400-500 million leva may have to be released next year to offset the fund's deficit. She said the domestic black labour market was growing at a dangerous pace and that was hurting the country's economic growth.

The contributory income of 400,000 employed was equal to the minimum wage, she said. In her view, the domestic labour market was too liberal. Employers that have people working for them without any labour contract or paying their workers wages different from the amount specified in the contract of employment could be fined 200-2,500 leva. "So, in this respect, there are perfect conditions for nonpayment of social security contributions," Shuleva said.

"The Social Ministry has a number of regulatory changes on the drawing board in addition to the amendment to the Compulsory Social Security Code which sets the maximum and minimum contributory income and eliminates the interdependence between the minimum wage and the contributory income," Shuleva said.

Last week, Yordan Hristoskov, chairman of the NSSI, said that they expect the funds of the institute to rise by about nine million leva by the end of the year because the minimum salary will be higher in the last quarter of 2001. This money will come from self-insuring people, who total 176,000, according to NSSI estimations. Raising the minimum salary will expand the basis for their social security contributions and this will bring some 5.4 million leva to the NSSI.

The remaining amount of the nine million leva will come as a result of the fact that there are about 370,000 people in Bulgaria working at the minimum salary and employers pay their social contributions. Raising the minimum salary will bring additional income from contributions of both employees and employers.

According to Shuleva, the government is trying to find the balance between 2002 budget outlays that can be reduced and the outlays that cannot, and the revenue that has to be guaranteed.

"In order to offset the drop-off in budget revenue after the introduction of a zero corporate income tax, we will try to stimulate employment and the development of new technologies, and fight the gray economy," she said.

The program of the fund for micro-credits will be ready by October 1, she said, adding that the reports of the regional governors will be ready by September. The government's economic program will also be ready by then.