Банкеръ Weekly

Briefs

BULGARIA'S FOREIGN DEBT STANDS AT EUR14.3BN-PLUS

It may sound absurd, but Bulgaria's gross foreign debt is presently higher than in the dramatic 1990 when the State announced a moratorium on servicing its liabilities to foreign creditors. Of course, there are drastic difference from sixteen years ago. The most important one is that the country doesn't experience any difficulties in paying off its interests and principals on foreign credits. While in 1990 the remittance of USD600-700MN was a huge problem, it is not something dramatic now for the country's forex reserve, even when the Bulgarian economy pays EUR5.71BN annually to service its foreign debt. That is the exact amount (including principal and interest), according to BNB's statistics, transferred in 2005 to foreign creditors of the State, of Bulgarians banks and enterprises. And in order to avoid any misapprehension, we'll specify that a total of EUR2.35BN was paid in servicing the State's foreign liabilities, EUR1.4BN - for repayment of commercial banks' debts, EUR848MN - for foreign credits borrowed by private Bulgarian companies, and EUR1.11BN - for intercompany liabilities.
Despite these huge expenditures for servicing the Bulgarian economy's foreign debts, BNB's forex reserve increased by EUR880MN in 2005, from EUR6.49BN to EUR7.37BN. Even if we ignore the growth of the gold reserve by almost EUR200MN, which is entirely due to the increase of gold prices on international exchanges, the forex reserve went up by EUR680MN in 2005. This is a considerable amount, considering the big payments made by Bulgaria's economy to foreign creditors.
Our country wouldn't be able to make such substantial expenditures for servicing its foreign debt if it didn't have serious forex proceeds from abroad. BNB's statistics show that EUR5.5BN entered this country in 2005 in the form of deposits and loans. The bulk of that money - EUR3.5BN - are credits and investments, received by domestic companies. Deposits and loans, extended by foreign financial institutions to Bulgarian banks, amount to EUR1.7BN. And the State borrowed new credits totalling EUR285MN. These data confirm a clearly outlined and durable tendency towards a decrease of the State's debt and a quick increase of banks' and private firms' liabilities to foreign lenders. In the beginning of 2005 Bulgaria's gross foreign debt stood at EUR12.42BN, of which EUR5.25BN was the State's liabilities, and the remaining EUR7.27BN - liabilities of private companies and banks. Twelve months later the Government's debt to foreign creditors shrank to EUR4.15BN (17.6% of GDP), while private companies' and banks' liabilities rose to EUR10.1BN. The trend is expected to persist in 2006, with the State's debt to foreign creditors going down to EUR3.5BN, and the private sectors' liabilities going up to EUR11.5BN.

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