Банкеръ Weekly

Briefs

THE GOVERNMENT BRISTLED UP, BUT KEPT ITS CANE

IMF AND WORLD BANK ENSURE HALF OF FINANCING FOR THE BUDGETThe International Monetary Fund (IMF) and the World Bank remain the financial crutches supporting the stability of the Treasury. Regardless of the Government's declarations that Bulgaria's economy is independent and is capable of settling its foreign liabilities without the assistance of international financial institutions, the facts show something else. Foreign financing of the State in 2002 amounted USD282.7MN. Almost half of it - USD149.3MN - came from the IMF and the World Bank. The other international financial institutions, such as the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the European Development Bank have allocated credits worth a total of USD333.6MN to Bulgarian state-run and private companeis. However, thеy would hardly have extended any loans if the Bulgarian Government did not have agreements with the IMF and the World Bank. The signed and effective agreements with the two international financial institutions are still the most reliable proof for foreign investors and creditors that reforms which guarantee Bulgaria's solvency are being carried out in the country. The restructuing of all sectors, controlled by the State, in 2003 will be again udner the aegis of agreements with the two financial institutions. Although after big collisions, in January the governors succeeded to agree with the IMF to continue the two-year stand-by agreement under which about USD150MN will enter Bulgaria's budget. On February 21 in the presence of the Premier and almost the entire Cabinet, the Finance Minister Milen Velchev and the World Bank Country Director for Bulgaria Andrew Vorkink signed the Programme Adjustment Loan, known by the abbreviation PAL 1. After its ratification by Parliament the international financial institution will allocate a USD150MN credit, earmarked to support Bulgaria's payment balance. According to the World Bank's regulations, the PAL 1 loan is being released after the Government has fulfilled all its commitments to the bank. The Cabinet is presently preparing for getting the PAL 2 loan - also worth USD150MN - which is planned for the beginning of 2004. But before that happens the country should fulfill a number of requirements, which like the commitments under PAL 1, have been included in the three-year Strategy for National Support. This document was signed by the World Bank and Bulgaria in end-2002. As in the agreement with the IMF the document describes in detail all the reforms which the Government projects to carry out. The list usually includes the most serious problems of the Bulgarian society and the necessary measures for solving them. The observation of agreements under these programmes guarantees financial comfort of the governors, but the problems arising during their implementation almost always signal a ripening economic and political crisis.

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