Банкеръ Weekly



Johannes de Beaufort Wijnholds - leader of the IMF Dutch Group to the Banker weekly

On April 16, 2001 Johannes de Beaufort Wijnholds, leader of the IMF Dutch Group, arrived in Bulgaria. He met the Minister of Finance Muravey Radev and BNB Governor Svetoslav Gavrijsky. Members of the group he leads besides the Netherlands and Bulgaria are Israel, Cyprus, Romania, Ukraine, Croatia, Moldova, Macedonia, Bosnia and Herzegovina, Armenia and Georgia.
After the meetings with Radev and Gavrijsky the IMF official said that they have discussed the world economic situation and the way it may affect the country. We also discussed some aspects of the political situation in Bulgaria. I think that if there is continuity of the current economic policy after the elections, that will be well accepted both by the IMF and the other international financial institutions, said he.

Do you have any doubts that after the elections the situation and the economic policy may change?

- This depends, of course, on what you expect to happen, but what I understand is that to the extent that the political parties have formulated clearly in their economic policies they do not seem to be very different. And they are not very different in terms of what we see now. Nobody is challenging the framework of the currency board I understand, nobody is challenging the need to have a sound fiscal policy and to contnue with some organisational reforms. I think most of the very tough measures have already been taken. So it will be in a way a little easier for the next government.

According to you what are the major threats to Bulgaria for the financial stability and for the economic positive trends and what measures should be taken to avoid these threats?

- Well, the main threat would be if there were a sudden change in policies. That simply I would not recommend at all. You are on the right track. Current policy had brought a good stable situation with 5% economic growth. If you try to force a higher pace of growth in this economy it could be dangerous because if there is not the capacity, because investment has not been high enough you could end up with a massive inflation and this is not what you want, this is not the way to the European Union. The European Union and the European monetary union is an area of low inflation and stability. That's where you want to belong and therefore you need to invest and you need to invest more, but you can only get more investment in a stable climate with low inflation. So, no experiments with expanding money supplies - these things are not wise.

What will be the new IMF policy in launching credits to Bulgaria?

- Well, I do not think we'd have a new policy with regard to Bulgaria. We simply would encourage the country to continue as it has been doing. But as I said, in the new programme some of the conditions might be less detailed.

In your oppinion what agreement should be reached - a precautionary or a stand-by?

- I don't think I will go into that now, because this is something we should look at the time of the new government. There are arguments on both sides, but I don't think this is the most important thing. The most important is to continue a good relationship with the IMF, and whether that can be done in a precautionary form or in a stand-by way, there are actual drawings of money, it is not a huge difference.

What special problems should be taken into consideration in the negotiations with the IMF?

- On the managing of fiscal side things are pretty clear. I think there might be continuing need for some moderation in the wage increases in the state enterprises. And then there is still a further structural agenda to complete, although a lot has been done. What is clearly important is to continue to work towards sound privatisation and it's not easy, it's never easy, to make sure that state owned enterprises are viable, that they are not big loss makers and they do not drain out the budget.

And according to you how much financing will Bulgaria need to keep the positive trends?

- That is not something that I can put a fixed number on. But there is some deficit on the balance of payments on the current account. Last year that was covered by foreign direct investment, that's good, so the reserves are being made. So I don't think Bulgaria needs a lot of additional financing, as long as foreign direct investment is coming. Then that is not a huge amount needed. There are various options for the government to look at, but I am not going to put right now exactly how much they need. I cannot at this point give you a firm figure.

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