Bulgaria

Bulgaria has come a long way from its turbulent political and economic transition in the 1990s to becoming a member of the European Union in January 2007. Today, it is an upper middle-income economy of 7.6 million people with a per capita income of $6,530. (GNI per capita, 2011.)

In the decade leading up to EU accession, Bulgaria embraced difficult reforms to build macroeconomic stability and stimulate growth. It built fiscal buffers by accumulating fiscal surpluses between 2004 and 2008, and reduced public debt from over 70 percent of GDP in 2000 to 16.3 percent in 2010, one of the lowest debt levels in the EU today. Between 2000 and 2010, average annual growth reached 4.7 percent. During that same period, Bulgaria’s per capita income as a share of the EU average increased dramatically from 28 percent to 44 percent. Today, Bulgaria remains among the most fiscally disciplined EU member states ─ an important feat in the context of global and European economic uncertainties.

To build on the achievements of the last decade and move to a higher growth path in the current economic environment requires bold government actions and investments. To stimulate private sector-led growth, the Government of Bulgaria has placed better roads, rail and water infrastructure and creating an enabling business environment at the top of its agenda. It also pledged to strengthen the delivery of public services and work towards ensuring all citizens reap the benefits of growth.

At a time of tight government budgets, removing constraints to development and financing much-needed investments pose a daunting challenge. This is where EU Structural and Cohesion Funds can play a critical role in Bulgaria’s quest for growth. Under the current EU financial perspective covering the years 2007-2013, Bulgaria has access to approximately €7 billion in grants. The Government estimates that only 20 percent of this amount has been absorbed to date, and has identified the efficient use of EU funds as an important opportunity to finance public investments and accelerate EU integration.

With the objective of boosting EU funds absorption and supporting the National Reform Program, the Government of Bulgaria and the World Bank signed a Memorandum of Understanding (MoU) in January 2012, marking an important shift in the 20-year partnership from traditional lending operations to a greater focus on knowledge and advisory services. The evolving partnership represents an important step taken by the Government of Bulgaria to draw on World Bank’s expertise to develop and implement strategies and programs in a range of sectors under Operational Programs financed by EU Structural Funds. In the first phase, the World Bank will deliver, on a cost-recovery basis, knowledge and advisory services in the areas of roads, water, railways, innovation, business regulation and social inclusion.

The MoU is consistent with the World Bank Group’s Country Partnership Strategy for Bulgaria for 2011-2013, aimed at supporting the Government in achieving smart, sustainable and inclusive growth – in line with the European Commission’s Europe 2020 Strategy.

The World Bank Group’s Country Partnership Strategy for Bulgaria (CPS), endorsed in 2011, provides a framework for support for the period of 2011-2013.  The partnership focuses on Bulgaria as an EU member state with the World Bank Group’s principle role as a provider of knowledge and advisory services.  These services are complemented with selective lending for activities that are not eligible for financing through EU Structural Funds or lending by European institutions and international financial institutions.

Advisory and knowledge services will focus on roads and water infrastructure; improving the business regulatory environment; strengthening public administration and public finance; boosting the national green growth agenda, including energy efficiency; as well as providing support for railways, education and the social inclusion of vulnerable groups, especially Roma.

To contribute to Bulgaria’s efforts to achieve these objectives, the CPS proposes a three-pillar framework of support.

• The first pillar will aim to provide knowledge and advisory support for policy reforms to implement select areas of the National Reform Program.
  
• Under the second pillar, the Bank will seek to deliver knowledge and advisory support to strengthen institutions and capacity to accelerate EU funds absorption.
  
• The third pillar envisages complementary and selective provision of financing. In addition, the Bank’s existing portfolio of lending operations is being re-aligned to expand support for Bulgaria’s EU funds absorption priority.

The International Finance Corporation (IFC) will focus its private sector investments on renewable energy and climate change-related infrastructure and industries, social sector private investments and selectively in agriculture. In the short-term, IFC will address the impact of the crisis in Bulgaria by supporting the recovery of the private sector and reducing job losses. As of September 2011, the IFC has 35 projects (complete and ongoing) in Bulgaria with total commitments of over $690 million. The single biggest investment of IFC in the country is in the field of renewable energy in the form of a loan for the construction of the largest wind park in Bulgaria. IFC is also involved in a number of sizable investments in various projects in manufacturing sectors, oil and gas, financial markets, and agriculture.

The Multilateral Investment Guarantee Agency (MIGA) has provided 10 guarantees between 1994 and 2006, for a total of  $232 million.

As of January 2012, the active portfolio of World Bank-financed projects in Bulgaria consists of four operations with original commitments totaling $353 million equivalent. In addition, one Institutional Development Fund (IDF) grant in the total amount of $0.4 million is being implemented, and a second IDF grant in the amount of $0.2 million has been approved.

The World Bank Group has been partnering with Bulgaria over the last 20 years, providing financing, knowledge and advice.  It has provided $ 9 billion in financing for some 90 separate operations in Bulgaria since the transition. 

Since Bulgaria joined the World Bank Group in 1990, the total value of its support is roughly US$4 billion, for 45 IBRD operations, 10 MIGA projects, and over 35 IFC projects supporting reforms in areas such as banking, revenue administration, health, social welfare, environmental protection, general manufacturing, agribusiness, infrastructure, and renewable energy sectors. A series of measures were also undertaken to improve the country's business climate.

World Bank financed projects have helped deliver tangible results:

• More than 700,000 people benefited from small social infrastructure improvements and services through the Social Investment and Employment Promotion Project.
  
• Supported by the Revenue Administration Reform Project, improvements in revenue administration contributed to increased tax and social contribution revenues by 4.6 percent of GDP between 2002 and 2008, the highest revenue gain among new EU member states.
  
• Turnaround times for registering a real estate transaction and mortgage were reduced to a single day – down from seven days – through the Registration and Cadastre Project.

The active portfolio of World Bank’s financed operations focuses on infrastructure and social inclusion.

The Municipal Infrastructure Development Project seeks to improve the reliability and quality of water provision to communities in selected settlements in the project area, and assist municipalities in investment-planning for the water sector. The Project supports preparation of regional Master Plans for Water Supply and Sewerage systems and completing the construction of three dams that was interrupted about 20 years ago, along with the rehabilitation of a fourth dam that is currently operational.

The Road Infrastructure Rehabilitation Project aims to assist Bulgaria in reducing road transport costs by improving the condition and quality of its roads network during the first years of EU accession. The project objectives will be achieved by: improving the condition of selected roads in the national road network; enhancing the Roads Infrastructure Agency (RIA) capacity to adopt efficient planning policies and effective management of maintenance, rehabilitation, and construction programs; and assisting Bulgaria in articulating a road safety strategy and identifying priority activities to improve road safety.

The Social Inclusion Project (SIP) aims to improve chances of children with marginalized backgrounds, including Roma children. The project will help children below the age of seven from poor and disadvantaged families, as well as children with disabilities, to prepare for school. Because of their social situation, many vulnerable children reach school age and go to school without the necessary preparation. They are not on equal footing with their peers and they drop out early from school. The project will improve their welfare by using early involvement mechanisms, safeguarding their health and education opportunities, and working with parents before the children reach school age.

The Second Trade and Transport Facilitation Project aims to improve physical infrastructure of the border crossings; more efficient customs formalities, facilities, and procedures; as well as improved communication and sharing of relevant border crossing data and streamlining the operational procedures of the border crossing agencies.