Overview

Bulgaria is a country of about 7.2 million people, and has been a member of the European Union (EU) since 2007.

Bulgaria has undergone a significant transformation over the last twenty years. It has moved from being a highly centralized, planned economy to an open, market-based, upper middle income economy securely anchored in the European Union. In its initial transition to a market economy, the country went through a decade of slow economic restructuring and growth, high indebtedness, and loss of savings.

However, advancement of structural reforms starting in the late 90s, the introduction of the currency board and expectations of EU accession unleashed a decade of exceptionally high economic growth and improved living standards of Bulgarians. Yet, some legacy issues from the early period of transition, the global economic crisis of 2008 and a period of political instability in 2013-14 undid some of the gains achieved during the high growth period.

Now, in its pursuit of boosting growth and shared prosperity, Bulgaria is moving to address these issues. It will take a shift towards growth-enhancing and poverty-friendly policies, as well as sustained efforts to build strong institutions that protect the rights of all Bulgarians and ensure well-functioning markets, to put Bulgaria on a higher growth trajectory.

Today Bulgaria faces the two inter-related challenges of raising productivity and addressing issues related to the country’s rapid demographic change. Higher productivity growth is critical for accelerating convergence as Bulgaria’s income per capita is only 47 percent of the EU average, the lowest in the EU. Productivity will need to grow by at least 4 percent per year over the next 25 years for Bulgaria to catch up with average EU income levels and thus boost shared prosperity. Since 2008, however, productivity growth has been slowing down.

At the same time, Bulgaria is facing a significant decline in the size of the working age population, putting at risk future growth prospects in an already challenging global environment.

Within only three decades, Bulgaria has become the third oldest country in Europe and by 2050 its working age population is projected to be lower than in 2010, the steepest decline in the world. Bulgaria’s geographic location also places it on the EU’s frontline of many geopolitical and energy security issues of the day.

Building on Bulgaria’s achievements, the World Bank Group has adapted its business model to support the country’s goal of EU convergence. Its partnership with Bulgaria is based on a flexible framework that takes into account Bulgaria’s priorities as an EU member state.

The evolving partnership represents an important step taken by the Government of Bulgaria to draw on the World Bank’s expertise to develop and implement strategies and programs in a range of sectors under Operational Programs financed by EU Structural Funds.

On September 1, 2015, the World Bank’s Vice-President for Europe and Central Asia, Cyril Muller, and Bulgaria’s Deputy Prime Minister for EU Funds and Economic Policies, Tomislav Donchev, signed a new MoU on partnership and support in the implementation of the European Structural and Investment Funds for 2014-2020 period.

Last Updated: Jul 11, 2016

The World Bank Group’s Board of Executive Directors endorsed in May 2016 the new Country Partnership Framework (CPF) FY17-FY22 for Bulgaria for the next six years, aimed at strengthening institutions for sustainable growth and investing in people. With Bulgaria as an EU member, the CPF is aligned to coincide with the EU programing cycle.

The CPF marks a renewed engagement with Bulgaria, including the first new lending operations since 2010. The program was well informed by the Systematic Country Diagnostic for Bulgaria, which identified three transformational areas for Bulgaria’s sustainable growth and shared prosperity, as follows:

  1. Strengthening the institutional and legal framework for good governance,
  2. Boosting the skills and employability of all Bulgarians,
  3. Improving the effectiveness and efficiency of public spending.

The Country Partnership Framework sets out a selective engagement, but with more ambitious objectives in two key areas where there is strong government ownership and demand for World Bank Group support.

The program includes a variety of instruments, and a closely coordinated engagement between all World Bank Group organizations, namely the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA), in order to meet Government expectations and achieve results.

The partnership will be reviewed every two years to assess progress and priorities and to recalibrate specific objectives and activities in the light of developments and changes in priorities. For the first two years, the partnership will focus on two areas: strengthening institutions for sustainable growth and investing in people.

Under the first area, the CPF objectives are to: i) improve the resilience and stability of the financial sector; ii) strengthen the electricity sector and improve energy efficiency; and iii) better protect natural assets and improve efficiency in the use of resources.

The program includes two lending instruments in support of the Bulgarian Deposit Insurance Fund and National Program for Residential Energy Efficiency for a total amount of EUR 550 million.

The second focus area, namely investing in people, reflects the shared commitment by the Government and World Bank Group to ensure that the benefits of economic growth accrue to all Bulgarians and provide an opportunity for everyone to contribute to the country’s prosperity.

Last Updated: Jul 11, 2016

Bulgaria joined the World Bank in 1990 and since that time, the World Bank Group has been engaging with the Government on a wide range of reforms. The Bank-supported government reforms have: remedied past environmental damage; reduced the population’s health risks; mitigated some of the costs of the transition and the 1995–96 crisis; supported a reduction in the fiscal costs of public debt, freeing resources to support spending in the social sectors; and improved the business climate.

The World Bank’s program in Bulgaria to date comprises 45 International Bank for Reconstruction and Development (IBRD) operations, with a total original commitment of roughly US$3 billion equivalent, consisting of 15 adjustment loans (US$1.73 billion), 23 investment projects (US$1.12 billion), one debt reduction loan (US$125 million), four World Bank–managed Global Environment Facility (GEF) grants, two World Bank–managed Prototype Carbon Fund (PCF) operations, and two Institutional Development Fund (IDF) grants.

The International Financial Corporation (IFC) comprises an important element of the World Bank Group’s strategy in Bulgaria. It focuses its private sector investments on climate change–related infrastructure and industries, social sector private investments, and, selectively, agriculture.

IFC’s strategy in Bulgaria includes investing in less developed regions and municipalities, as well as in the sectors and projects where private financing remains limited. The climate change agenda continues to be a priority in both investment and advisory services, with a focus on helping develop successful public private partnerships. Following reforms in the social sectors (e.g., health and education), IFC will reach out to private sector players with the aim of supporting sustainable projects and addressing strategic demographic issues. IFC’s committed investment portfolio in Bulgaria as of March, 2016 was US$275.1 million.

The Multilateral Investment Guarantee Agency (MIGA) provided 10 guarantees between 1994 and 2006, for a total of US$232 million. The last MIGA guarantee was in infrastructure in 2006 for US$117.8 million.

Last Updated: Jul 11, 2016


LENDING

Bulgaria: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments