THE relationship between the International Monetary Fund and Bulgaria appears to be on a sound footing.
This emerges from the fact that, on May 18, the IMF’s executive board completed the first review of the Bulgarian Government’s programme of economic and financial reforms for 2004 to 2006, which are being implemented in terms of the precautionary stand-by arrangement with Bulgaria.
Approved on August 6 2004, the two-year stabilisation arrangement of the “precautionary” type provides for the implementation of a programme co-ordinated with the IMF using the loan only as a last resort.
It is the last such arrangement between the IMF and Bulgaria, and will play a bridging role in the country’s transition to full European Union membership, the Finance Ministry said in a statement.
The positive view taken by the IMF’s board was a result of the stable macroeconomic indicators Bulgaria has achieved, its reasonable and flexible fiscal policy, and creation of the prerequisites for faster economic growth.
The ministry said that Bulgaria had made good progress in establishing the principles of a market-oriented economy, and had carried out important financial and economic reforms in clear support of the process of European integration.
The progress made was a positive signal to the international economic elite, guaranteeing that the country’s macroeconomic stability would be maintained in the future, the ministry said.
“Bulgaria’s macroeconomic performance in 2004 exceeded expectations under the stand-by arrangement and external vulnerability has decreased. The authorities’ economic programme for 2005 aims at continued strong economic growth, moderate inflation, and the containment of the external current account deficit in the context of the currency board arrangement,” said Anne Krueger, first deputy managing director and acting chair of the IMF’s board.
The programme relies on a measured easing of fiscal policy, wage restraint in the public sector, a slowdown in credit expansion, and a reinvigoration of structural reforms. Krueger said that the authorities’ fiscal programme was aimed at a general government surplus of at least one per cent of GDP. Given the need to reduce remaining external vulnerabilities, this modest easing of the fiscal stance would be coupled with strengthened efforts to curtail private domestic demand through measures to slow credit expansion.