The Finance Ministry plans to reduce the government's budget deficit to zero, but this is unlikely in 2002 and will probably happen in 2003, said Finance Minister Milen Velchev at a press conference on Friday.

The ministry wants to put a special provision in next year's budget act stating that any surplus in budget revenue will first be allocated to reducing the deficit and then for other purposes. In 2002 the budget deficit may be 1.5 per cent of GDP, compared to this year's forecasts of 2.5 per cent for 2001. The figure, as well as the other budget parameters, will become clear after the meeting with the IMF mission due to arrive on September 11.

"Bulgaria might issue eurobonds, depending on the country's need for funds. It will seek the cheapest way for finding money such as external loans or funding from domestic sources," said Velchev. The Finance Ministry will try to bring the country's foreign debt down to less than 60 per cent of the annual GDP.

Bulgarian and Russian positions on the repayment of Russia's $100 million debt to Bulgaria are converging. "We will try to get the best terms for Bulgaria," said Velchev. Until recently Russia wanted to settle the debt through supplies of spare parts for the Bulgarian Air Force and equipment for the Kremikovtsi metal works plant.

When he introduced the new Finance Ministry team, Velchev said that professionalism and integrity had been the basic criteria for selecting staff. They include people with financial experience from abroad. "It is obvious that corruption cannot be dealt with right away, but the struggle against it will continue," he said.

Meanwhile, in a television interview on Sunday, the finance minister said that he expects "a modest growth" of inflation, in the range of 4-5 per cent until the end of this year. He recalled that in the first seven months of the year inflation was less than one per cent. He predicted that the figure next year will probably be even lower. The macroeconomic framework preparation for next year's budget includes inflation of around 2.5 per cent in 2002.

Velchev drew attention to the fact that the budget was not in the strong condition that the previous government claimed it was. "As a result of irregular payments of interest on the Brady bonds, the budget ran into a deficit, not surplus, of $130 million," said Velchev.

Last week it was revealed that Velchev is a millionaire. A declaration of his property status submitted to the National Audit Office showed that he had bank deposits totalling 944,931 leva and 50,077 leva of receivables. He has a 357,787 leva mortgage, holds securities worth 155,218 leva and owns five apartments and a plot of land. He has shares in Merrill Lynch and in another investment fund and has investments in a pension fund and a broker account in Romania.