Банкеръ Weekly



Mr. Flickenschild, your last mission to Bulgaria is over. Have you made your personal choice? What will be your next job after finishing your mandate in the IMF?
- My mandate with the IMF continues. I got several new proposals and one of them is for a job in Bulgaria's neighbour Romania. But have not made my mind yet. It will depend on my wife, too, because she also works for the IMF in Washington and she will have to decide if she would like to move.
Are you satisfied with what you achieved during this mission and how do you estimate the results of the negotiations with the Bulgarian Government?
- I am satisfied, although it is impossible to achieve everything during negotiations. I believe, however, we have agreed with the Bulgarian Government and the BNB on a very good package of measures, the best one that could be negotiated under the circumstances. So, it is a good moment to say good-bye. I'm certain my parting would had been quite sad if we had failed to reach that agreement.
Did you step back in your negotiations with the BNB regarding the credit policies of commercial banks? Do the measures proposed by the central bank compensate the restrictions you have required earlier? Why have you persistently insisted on measures regarding consumer crediting despite of the fact that the import of consumer goods is only some 15% of the aggregate volume of imports into this country?
- Indeed, we did step back but it should be viewed that way: we proposed some credit restrictions initially, but the BNB answered they had better proposals. We considered them and okeyed them. We judged they would work and prove successful. Why should we then insist on our proposals?
At the press conference the BNB Governor announced a measure which could render credit restrictions more efficient, including bond instruments, which are in fact credits. The central bank will demand from banks to limit their loans to households which are not left sufficient money after paying their taxes and debts. In addition, the calculation of the repayment instalments should be based only on the officially declared incomes of the borrower. This measure will also increase the tax collectability. Measures will be applied also in the field of mortgage crediting, which will render mortgages more expensive and will reduce the credit growth.
We agreed with the BNB-proposed measures and its Governor said the growth in household credits will tangibly go down after they are undertaken. And it is this growth that has a strong influence on the current account deficit. Our econometric analyses and statistics prove it.
Non-bank crediting compensates to a certain extent the somewhat reduced (because of the restrictions) volume of bank credits. Should the BNB regulate the operation of leasing companies and credit houses as well?
If it comes to control, it will be probably not exercised by the BNB, but by the Financial Supervision Commission. We have been witnessing the quick development of these sectors, although they are still small. At this stage, however, I don't think they should be limited. Of course, they are liable to regulation and accountancy like any other activity. The BNB is already collecting the reports of leasing companies. Their aggregate portfolio amounted to BGN1BN by end-September, 2005. They are expanding their operations and they might have received additional impetus due to the bank restrictions. But at the same time, we do not know how quickly the non-banking credit system would had developed if there were no bank restrictions.
Why does the IMF insist on closing down the duty-free shops, although the country has a huge current account deficit? Did you reach an agreement with the Government on that issue?
- We insisted on closing the duty-free shops because they deprive the Government of tax revenues and they give leverage to a small number of consumers only who manage to buy cheaper goods there. They are profitable to the traders, holding the concession or licence, and heap big money. They obviously use it to buy political influence and preserve the status quo. They have already accumulated huge amounts of money and they be content with that and give up their privileged status.
However, we have not reached an agreement on that matter because it requires significant political efforts on the part of the Government. The IMF expressed its stance that it was advisable to close down all duty-free shops, except the one at the international air terminal. The Cabinet should adopt the new Duty-Free Act and enforce it by the year-end. This will practically mean limitation of the quantities sold to citizens, increase of control on duty-free units by using cameras and teams for unexpected inspections. Such free-shops are not to the likening of the EU. Greece, Turkey and Romania will soon have to shut them down. Bulgaria and Turkey will have to sign special bilateral agreements. The establishments in Bulgaria are to be closed down in a short term and border control against smuggling from Turkey increases.
What legacy will you leave to your successor, Mr. Hageman?
- The fulfilment of agreement we have already reached. It's relatively easy to come to an agreement but its realization is far more difficult. However, I'm optimistic that he won't meet any difficulties, although nobody knows what problems could arise in the process of the agreement's fulfilment. Mr. Hageman will face the challenge to find solutions and cope with the problems.
Will there be a new stand-by agreement with the IMF if Bulgaria's EU-accession is postponed by a year?
- Your question is hypothetical because I expect Bulgaria to join the EU on January 1, 2007. When we were making an assessment of our long presence in this country, the conclusion that we arrived at in the IMF was that the present agreement would be the last one. And it will play the role of a kind of an exit to a new perspective, Bulgaria's full-fledged EU membership. However, if that period is extended, IMF's decision could be revised. And if Bulgaria wants a new agreement, it could be closed.

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