Box: Emergency Support to Bulgaria

The Bulgarian government reached agreement with the IMF on March 17 for an economic stabilization program to be backed by new loans totaling $660 million, mostly from a $510 million standby facility. This will be disbursed in six tranches over fourteen months, subject to the country meeting quarterly conditions. The stabilization program is to be based on a currency board system, under which the exchange rate will be fixed and the money supply fully backed by foreign currency reserves. The budget deficit is to be cut to 4 percent compared with 11 percent in 1996 and a similar level in the first half of this year, and foreign reserves are to rise sharply. In the long term the government has committed itself to accelerating structural reforms, including faster privatization, greater price and trade liberalization, and higher foreign direct investment. The World Bank is discussing loans worth about $290 million—$170 million from two financial and enterprise structural adjustment loans, $40 million for financing critical imports of grain, medicines, vaccines, and basic foodstuffs; and $80 million for social protection. In mid-April the EU and OECD will discuss additional balance of payments support, which could amount to $300 million. The Bulgarian National Bank said it had foreign exchange reserves of $445.5 million at the end of February. Bulgaria has foreign debt repayments of more than $800 million due this year.