Cabinet approves BGN 2.1bn for F-16s acquisition

The ministers have proposed amendment to the 2019 budget that now awaits parliament's decision

The Council of Ministers approved a bill to amend and supplement the 2019 State Budget Act to accommodate the costs of buying eight F-16 fighter aircraft for the Bulgarian Air Force, the government press service reported. The ministers wrote in their reasoning for the bill that this new type of fighter aircraft is extremely important for Bulgaria's national security and defence and for implementing NATO's collective defence mechanisms and the EU's common defence and security policy.

Following negotiations with the US government, a formal proposal was made to sign four separate contracts between the two countries' governments to allow Bulgaria to acquire eight F-16 Block 70 fighter aircraft, armament and related systems for long-term operation and maintenance, as well as to ensure comprehensive training of pilots and auxiliary personnel. The contracts were signed by Defence Minister Krassimir Karakachanov on 11 July and are due for ratification by the National Assembly.

The contracts envisage that the money for the estimated costs of the deal should be deposited in full in a US government account shortly after the contracts are signed, the press release said. The money thus deposited will be used by the US Defence Security Cooperation Agency (DSCA) to make payments over the course of the implementation of the contracts. Under the US Foreign Military Sales programme, part of the money to be remitted by the Bulgarian Defence Ministry to the US government can be deposited and invested in bank and investment accounts at the Federal Reserve Bank of New York, allowing Bulgaria to earn income on these deposits. The process of setting up such accounts and transferring the money could take about six months.

This requires signing an agreement between the Bulgarian Defence Ministry, the DSCA and the Federal Reserve Bank of New York, with the Bulgarian National Bank possibly sharing in the agreement as a state agency. The amount of the money which may be transferred in this way will be determined by the DSCA. The US government account should have enough money to cover current DSCA payments under the project for 90 days. It is standard practice to invest this kind of money in overnight deposits and low-risk short-term federal treasury bills with various maturity periods.

The Bulgarian government press service went on to say that this financial model for the F-16 deal requires extra expenditures in addition to those approved by the National Assembly in the 2019 State Budget Act. Therefore, the Council of Ministers has prepared a bill to amend and supplement the 2019 State Budget Act, aimed at increasing the expenditures of the Defence Ministry by BGN 2.1bn.

Based on an estimate that the F-16 purchase will push up state budget expenditures this year by BGN 1.829bn in net terms, the bill proposes that the state budget deficit be increased by that amount, meaning that the deficit will reach BGN 2.228bn.

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