Two instruments finance agricultural policy related actions. These are The European Agricultural Rural Development Fund (EARDF) and The European Agricultural Guidance and Guarantee Fund (EAGGF). Financing of structural action comes from The European Regional Development Fund (ERDP), the European Social Fund (ESF) and the Cohesion Fund. Annex I summarizes these financial instruments of the Union.

Despite the sizeable EU commitments to Bulgaria, actual disbursements (or payment appropriations) are expected to be significantly lower than the committed resources. The gap is estimated to be on average around 2.5% of output in the first three years (see Table 2). This variance between commitments and payments stems from important legal distinctions between the two types of appropriations. The EU commitment appropriations cover the total envelope for projects that are foreseen in documents for the programming period, as if they were to be carried out in their entirety during that period. Put differently, commitments cover legal obligations made during the fiscal year for actions which may occur over several years. Since some of the programs cannot be fully completed in the programming period, appropriations for payments are lower than the commitments for the planned projects every year. Appropriations for payments cover only costs actually incurred during the year (but that may be related to commitments for the current year as well as previous years). These estimates of appropriations therefore represent only a share of the committed resources.

**Table 2: Payments and Commitments Appropriations’ Gap, 2007-2009, % GDP**<sup>**4**</sup>

||**Commitments**|**Payments**|**Gap between commitments and payments**|
|---|---|---|---|
|2007|4.8%|2.3%|2.5%|
|2008|6.2%|4.0%|2.2%|
|2009|7.1%|4.3%|2.8%|

_Source:_ Own calculations based on Financial Package for Bulgaria and Romania from February 10, 2004 and EU Accession Treaty for Bulgaria and Romania In addition, the size and the disbursement schedule of payment appropriations are often conditional. Payments from the Structural and Cohesion Funds as well as the remainder of preaccession aid are contingent on the implementation of specific projects.<sup>5</sup> In addition, the utilization of available payments depends on the absorption capacity and may deviate from the _ex ante_ projected payments (as the ones presented in Table 4). Conversely, payment appropriations covering direct payments to farmers, market interventions in agriculture, budgetary compensations, and Schengen border-related expenditures are transfers that can be taken as actual future disbursements. Overall, in estimating the amount of payment appropriations for Bulgaria, full absorption of the payment appropriations (but not commitments) is assumed.

In sum, given the maze of rules governing EU resources to member states, determining the size of actual payment appropriations by type is key to correctly projecting the effects of Bulgaria’s accession on both its balance of payments and national budget.

> 4 For the calculations in percent of GDP and of GNI throughout the paper forecasts of the Agency for Economic Analysis and Forecasting have been used. GDP is projected at BGN 49021mn in 2007, BGN 53274 mn in 2008 and BGN 57535 mn in 2009. GNI projections for 2007, 2008 and 2009 stand at BGN 47965 mn, BGN 52003 mn and BGN 56144 mn, respectively.

> 5 Structural Funds payments do not include payments from the EARDF.

4