News Brief: IMF Completes Bulgaria Review and Approves US$70 Million Credit Tranche

March 31, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the third review under the Extended Fund Facility1 arrangement for Bulgaria. As a result, Bulgaria will be able to draw up to the equivalent of SDR 52.3 million (about US$70 million) from the IMF.

The three-year Extended Arrangement was approved in September 1998 for a total amount equivalent to SDR 627.62 million (about $US844 million).

In commenting on the IMF Executive Board's discussion, Stanley Fischer, acting Managing Director, stated:

"The Bulgarian authorities have implemented sound policies that had brought macroeconomic stability to Bulgaria and which last year had helped the country weather severe external economic shocks with relatively limited economic disruption. Prudent fiscal and incomes policies and an acceleration in structural reform helped to curb the current account deficit, preserve competitiveness, and initiate a recovery of economic activity and exports in the second half of 1999. Owing to these policy efforts and an improved external environment, the outlook is for higher growth in 2000.

"Despite the recent progress and encouraging immediate prospects, continued implementation of sound policies is necessary to achieve the near-term objectives of sustained high growth and reduced unemployment and poverty, and the longer-term goal of EU accession. In this connection, the prudent 2000 budget and institutional reforms to ensure long-term fiscal sustainability (unifying revenue collection, implementing a treasury, and overhauling the pension and health systems) are welcome. Wage moderation and flexible labor markets will also be important for preserving competitiveness and reducing the presently high rate of unemployment.

"While 1999 was the year of most intensive reform so far, continued rapid progress in structural reform remains critical to strengthening Bulgaria's medium-term growth prospects. In the period ahead, the authorities intend to implement strong initiatives on a wide front. Key priorities include selling the remaining large-scale commercial state enterprises during 2000, strict and transparent implementation of restructuring in the energy sector, strengthening public administration, addressing governance issues, and further reform of the financial sector," Fischer said.

1The EFF is an IMF financing facility that supports medium-term programs that seek to overcome balance of payments difficulties stemming from macroeconomic imbalances and structural problems. The repayment terms are 10 years with a 4 ½-year grace period, and the interest rate, adjusted weekly, is currently about 3.8% a year.


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