Банкеръ Weekly



Peter Stella - IMF resident representative in Bulgaria to the Banker weekly

Mr. Stella, are you concerned with an eventual change of the Bulgarian political status quo, and do you think this might lead to a shift in the currently established priorities of the country's economic policy?
- My opinion is that the most rational thing would be the priorities to remain the same. I don't think there are any serious demands for a radical change of the economic policy followed practically in the last four years. And, if you stick to it, the possibilities of achieving something totally different from what the government has done, are rather limited. The situation requests the economic policy in Bulgaria to be conducted in the manner it was done till now. Your achievements could be better or worse, but as a whole you do not have many alternatives.
It is very important the currency board in the country to be retained, and this will guarantee a stable exchange rate of the national currency, as well as a low inflation rate and a continuous fiscal policy.
What strikes me in the discussions with the various investors in the last years is that they need predictability for Bulgaria. The notion is different from stability.
I don't think foreign investors will have any problems with an inflation rate of 2% or 20%, as far as they know that it will be 2% or 20%. Then they make up their financial plan, which they have to fulfil. And if they haven't done so by the end of the year, they need to give a plausible explanation to their superiors for the reasons.
Should the foreign investors are in a position to make a forecast of what the environment will be here, they will make up a good business plan and if they perform well, they will get credit for that, if not - then it is their fault again. So that predictability is what investors are looking for in Bulgaria. It would be fine if there are predictable exchange rates and low inflation, stable tax norms and laws, as well as a clear vision of the course the country is following.

What are the biggest challenges for the Bulgarian economy this year?
- The elections which will take place in June. I fear that the strong momentum of the reforms and the restructuring processes might slow down. The new Privatisation Act for example requests improvement of the strategies for sale of the big state-owned companies, which should be voted by the Parliament. This, however, should be done by the next Parliament. And we hope that it will act fast. The privatisation and structural reforms processes should continue, and the discipline in collecting state receivables should not loosen up, despite of the coming elections.

Do you think that the most important requirements IMF will have to Bulgaria will be related to debt management and what will be the consequences, in case they are not observed?
- I would rather consider this as a requirement of the investors and the market, rather than an IMF requirement. IMF is also undergoing certain internal re-organisation, directed towards establishing structures which will support the countries in their entering the capital markets. That was the point in establishing a new unit with the IMF Capital Markets Department. It will have to attract experts in this field, which will work jointly with the people, responsible for the debt management in the respective countries. This cooperation will enable us to get a better understanding of the specific needs for each country, which is interested in gaining access to the international capital markets. IMF strategy is to guide the respective countries towards entering the international markets, which will provide them with financing, making them less dependent on IMF financial resources.
This new unit will provide us information on the steps a country should make in order to issue bonds at the international markets under the most favourable conditions for itself. I have already discussed with the experts to work in it the positive and negative issues for Bulgaria. One of the negative things is the high ratio of the state debt to the GDP. While the achievements in the fiscal area are a strongly positive thing. People monitoring Bulgaria are convinced that it is not endangered by a crisis in any way.

Will you accept an eventual offer by the Bulgarian government to extend your mandate as an IMF representative in the country?
- I have been working in your country for more than three years and a half, which is a rather long period. IMF does not recommend its officials, both for personal and professional reasons, to stay in the same country for such a long period. I think it is slightly possible to be convinced in staying over another year in Bulgaria, and this has nothing to do with the country. Simply I have been outside IMF headquarters for a rather long period, and actually I think that the time has come for a change both for me, and for IMF, for Bulgaria and the new government here.

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