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 better comply with provisions on state aid and to facilitate analysis of the planning of such projects in the context of the country's budget. The Ordinance will enter into force on 1 January 2016.

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  analysis of the project, in terms of its financial and economic characteristics. Furthermore, the new Ordinance aims to achieve a clear separation between the standard investment projects that fall under it, and investment projects which are regulated under special acts or which due to their specificity require new targeted legislation applicable to their financing and realisation.

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 the projects that receive government financing should in theory lead to a positive long-term effect on its expenditure habits.