Банкеръ Weekly



The Bulgarian fiscal system will be under the supervision of the International Monetary Fund (IMF) for another half a year, till March 2007, it became known at the end of the fund's mission from Washington in May. The decision for extending our stand-by agreement with the IMF was made by the Bulgarian Government, the fund's Resident Representative in this country James Roaf underlined. It is surprising to a certain extent as just two weeks ago Finance Minister Plamen Oresharski publicly announced we were discontinuing our relations with the overseas creditors.
The main conclusions of the present review are that Bulgaria is achieving good macroeconomic indicators. Economic growth in 2006 is expected at 5.5 per cent. The inflation for the year will be higher than projected and will reach 6.2 per cent. The deficit in the current account of the balance of payments is still a problem. According preliminary Government estimates, it will be about 12.4% in end-2006. All that necessitates the supervision over Bulgaria's fiscal policy to continue till the year-end, Mr. Roaf explained. In his opinion, one of the serious problems are also the delayed structural reforms in this country, e.g. the improvement of the business medium, the education, the labour market, and the healthcare sphere where services need urgent improvement.
This year should end with a considerable budget surplus of at least 3%, Mr. Road said. The fund will probably insist on a budget surplus for 2007 as well. The fact that Bulgaria will have to make some expenses connected with our EU membership is not a reason for loosening the fiscal discipline. That money will be spent at the expense of cutting down the money earmarked for other budget spheres, Mr. Roaf hinted.
Moreover, the Bulgarian National Bank (BNB) will continue to supervise the commercial banks with regard to their crediting policies, although the restrictions to the banks will be loosened.
The domestic bank system is in a very good shape at present, with a very high capital adequacy of banks. The credit expansion of 2004 and the beginning of 2005 has been mastered and the growth of loans is expected at around 20% this year, BNB's Governor Ivan Iskrov said. He declared that in the third quarter of 2006 the central bank will start gradually lifting its restrictions on commercial banks.
In March 2007 the IMF will quit Bulgaria and won't be exercising direct supervision on the country's fiscal policy, nor indirect one through representatives of the European Commission (EC), fund insiders assured. Presently, talks are held with individual EC representatives, informing them about the current state of Bulgaria's fiscal system. The European Union is also interested in continuing the macroeconomic stability in Bulgaria, and the parameters for the next fiscal years will be approved by the EU Council on Economic and Financial Issues, Mr. Oresharski announced.

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