Банкеръ Weekly



There are already some complications in the negotiations between the Bulgarian Government and the new IMF Mission to the country. At the end of the first meeting between IMF experts and Bulgaria's Vice Premier Lidiya Shouleva, the Minister of Finance Milen Velchev, and the Governor of the Bulgarian National Bank (BNB) Ivan Iskrov, held on March 29, the Mission Leader for Bulgaria Mr. Hans Flickenschield, said that some of the country's macroeconomic indicators have been deteriorating (as it is known, it's the Government that is responsible for them). According to the head of the IMF Mission, Bulgaria's major problem remains the deficit on its balance of payment current account which is higher than the preliminary forecasts at the end of 2003. Statistical data from the BNB show that the 2003 deficit is USD1.648MN (8.7% of the GDP) which is over 60% above the one reported in 2002. More important, however, is the fact that in 2003 the current account deficit exceeds considerably (by USD580MN) its forecast year-end level.Despite these negative results, though, Hans Flickenschield with whom the Government is negotiating for the signing of a precautionary agreement explained that one reason for the deficiton the current account were probably the loans that Bulgarian companies received from abroad. The borrowed money is used for the acquisition and import of machines and equipment which raise the foreign trade deficit and, therefore, the deficit on the current account. The current account deficit has grown by 62% in 2003 compared to a year earlier, yet foreign investments have gone up by almost 57 per cent. It's disturbing, however, that the first report of the 2004 balance of payment doesn't mark such tendencies.According to the BNB statistics, the current account deficit amounts to EUR232.8MN for January 2004 and that is 46% above its January 2003 level (EUR159.4MN). The problem is that just USD39.5MN have been invested by foreigners in Bulgarian companies in January 2004 - twice less than the USD86.5MN invested a year earlier. Therefore, even if the IMF representatives conclude that the 2003 growth of the current account deficit is provoked by the large import of investment commodities, they will certainly pay serious attention to the results reported at the very beginning of 2004. And that means that the Government will have to commit itself to take measures that would eliminate the January negative results.The ministers from the cabinet led by Simeon Saxe-Coburg-Gotha have arguments which they will use to convince Mr. Flickenschield that the situation is not as bad as it seemsTo support that, they will underline that the budget is going to receive EUR230MN from the sale of the Bulgarian Telecommunication Company (BTC) and that they expect to get considerable revenues from the forthcoming privatisation of the companies included in the system of Bulgartabac Holding. But whether these arguments will convince Mr. Flickenschield that the stability of the Bulgarian economy is not in danger is not clear yet.The next problem found out by the IMF Mission in the very first days of its three-week visit to Bulgaria wasthe higher growth of creditingreported for the first two months of the current year.The rate at which the credits launched have been growing in the first two months of the year is slightly above the one we had expected, Hans Flickenschield highlighted.February 2004 data show that the total amount of credits launched to individuals and companies has grown by BGN488MN. From BGN9.376BN as of December 31, 2003, it has reached BGN9.864BN at the end of February 2004.By April 13, the mission experts will make a thorough assessment of the Bulgarian economyfor the period in which the country has used financing from the Fund. For this purpose, the IMF Mission includes special experts who are led by Carlo Cotarelli, Deputy Manager of the IMF European Department. His team is authorized to prepare a report on the role of the IMF in Bulgaria for the past ten years.It's written in the statute of the IMF that for each country that has used financing from the Fund for a period longer than ten years there is an obligation for a following assessment of the implementation of previous agreements, Minister Milen Velchev explained to the media.According to Carlo Cotarelli, the report on the thorough assessment of the relations between the IMF and Bulgariamay be divided in two periods - until and after 1997 (when the Currency Board was introduced as a result from the financial crisis).Till 1997, the programs between Bulgaria and the Fund failed to achieve their purposes, Mr. Cotarelli said. After that, however, the implementation of the agreements became much better and the bigger part of their goals were achieved, the Italian expert said to Bulgarian journalists.

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