The currency board represents stability, which encourages foreign companies to continue investing in Bulgaria, according to a senior Finance Ministry official.

Tsvetan Manchev of the Finance Ministry's Agency for Economic Analyses and Projections defended the board in a debate on Tuesday.

The debate, "In Favour or Against the Currency Board in Bulgaria" produced strong pleas for retention of the board.

"Investors describe as positive the introduction of the currency board in Bulgaria, and it should be preserved if the country wishes to remain attractive to them," said Manchev.

He said the board guaranteed predictable foreign currency exchange rates, stable prices and interest rates, and was one of the few mechanisms that led to macro-economic stability in Bulgaria.

One of the mechanisms to achieve stable growth under a currency board agreement was to restructure the expenditure side of the budget, in order to reduce taxes, Manchev said. He said this could be achieved through improving the management of public finance.

Another way to achieve growth was to revise all administrative regulations which obstructed business.

This would allow the state to withdraw from the economy and to promote private initiative and encourage investors, he said.

Banker Emil Kiulev, the chairperson of Bulgarian business club Vazrazhdane, said the board should be retained, and the country's interests should be defended in the agreements with the International Monetary Fund.

Kiulev said Bulgaria was far from scenarios like the one in Argentina.

He said the only reason for foreign investors to come to Bulgaria was the stability guaranteed by the board.

"Bulgaria does not have functioning institutions yet which can guarantee a calm economic environment and this is why it should not give up the board.

"To attract foreign investment, detailed forecasts for the next two to five years should be developed and the only realistic prospect at the moment is the currency board," Kiulev said.

He was confident that Bulgaria had sufficient financial resources to prop up its economy, without resorting to the foreign currency reserve.

Other economists said the issue of abandoning the currency board system should not be on the agenda because the conditions were not right.

But measures should be taken to stabilise the board and achieve high economic growth, they said.

Fast economic liberalisation was crucial, Dimitar Kostov, Lyubomir Filipov and Oleg Nedialkov said in an open letter to the media.

They said Bulgaria had not succeeded in realising the expectations of 1997, to achieve economic growth of 6 to 8 per cent through capital inflows.

They argued that growth rates should not be an end in itself but a feature of the currency board because this would be the only way to compensate for weaknesses of the fixed exchange rate and the impossibility of stimulating an active trade balance through monetary and currency policies.

Bulgaria has not entered the constructive period of operation of the currency board system, they said.

Professor Ivan Angelov of the Institute of Economics of the Bulgarian Academy of Sciences said on Friday that if the exchange rate of the lev remained fixed for six more years and the Government's hands were tied in the conduct of monetary policy, people would take to the streets.

Angelov opposed those who defended the system.

He said the economy had stabilised in the first few years of the currency board, but its positive effect has gradually subsided, giving way to negative developments.

Bulgaria had only just entered the downside phase and it was not too late to react, said Angelov.

The Argentine crisis had sounded an alarm for Bulgaria.

He suggested that an expert group be set up to analyse the benefits and the disadvantages of the currency board and assess the consequences for the country.

The expert analysis should be discussed by May this year and submitted to the prime minister, the president and the National Assembly chairman, Angelov said.