By Ron Synovitz, Robert Lyle
Prague, May 6 (RFE/RL) - Bulgaria is in a tight financial dilemma. It must repay about 1,200 million dollars in foreign debts this year. And hard currency reserves at the National Bank are reported to stand as low as 700 million dollars.
Economists say that the relatively low level of reserves has recently fueled the dramatic, nearly 40 percent crash in the value of the Bulgarian lev against the dollar. And speculation has been growing in the international financial community about Sofia's ability to service total foreign debts amounting to about 11,000 million dollars.
That makes this week's visit to Sofia by a team of experts from the International Monetary Fund (IMF) particularly crucial for the Socialist government of prime minister Zhan Videnov. Put simply, Bulgaria needs to borrow hundreds of millions of dollars in order to repay old debts.
Last week in Vienna, in an apparent attempt to quash rumors of a possible debt default, Videnov said that Bulgaria "shall be able to meet its (debt) repayments this year." But Videnov admitted that his government needs a new agreement with the IMF in order to make payments due at the end of July.
And since last year, both the World Bank and the IMF have withheld support to Bulgaria because the Socialist government has failed to stabilize the country's banking system or speed privatization. Those reforms are a prerequisite for any new funding agreement. IMF and World Bank officials also are concerned about Bulgaria's rising domestic debt burden.
IMF sources in Washington told RFE/RL that their delegation will assess the latest developments in Bulgaria's financial situation and discuss steps that Videnov could take to put the economy back on track.
Sofia became economically isolated in March of 1990 when then Prime Minister Andrei Lukanov declared a moratorium on repaying foreign debts. It was only after years of difficult negotiations that Sofia managed to reach an agreement in 1994 with the London Club on a repayment plan that reduced the country's debt by about half.
Michael Wyzan, an economist at the Prague-based Open Media Research Institute (OMRI), says that another debt default by Sofia would result in an calamity for people living in Bulgaria.
Default would further erode hopes of attracting desperately-needed foreign investment at a time when important international firms in the country, like BMW's automaker Rover Group, already are pulling out
Bulgarian National Bank deputy governor Mileti Mladenov rejects rumors that Sofia might default on its debt payments.
During the annual meeting of the European Bank for Reconstruction and Development in Sofia last month, Mladenov said that Bulgaria would "rely on alternative funding sources" if it does not receive new credits from the IMF and the World Bank.
Raiffeisen Zentralbank Austria, one of a handful of foreign banks with an office in Sofia, announced last month that it may grant a loan to Bulgaria in case it fails to meet IMF prerequisites.
Mladenov said proceeds from upcoming privatizations are another source of cash.
The government recently announced that it would sell up to 30 percent in the Bulgarian Telecommunications Company (BTC). But Privatization Agency Director Vesselin Blagoev told RFE/RL that the BTC sell-off probably will not be complete until next year at the earliest. Foreign investors are not lining up for that sale.
Another important privatization involves a stake in the chemical giant Sodi Devnia. Deputy Prime Minister Roumen Gechev says he expects more than 1,000 million dollars from that sell off. But so
far, Industry Minister Kliment Vouchev's opposition has delayed cabinet approval of the sale.
Bulgaria last received a stand-by loan from the IMF in 1994. When that agreement for 209 million dollars in credits expired in March, 1995, about 17 percent of the money had not been disbursed because Sofia failed to meet reform targets. Videnov's cabinet has not been able to qualify for any IMF lending since.
In its recent World Economic Outlook report, the IMF ranked
Bulgaria as a country less advanced in transition to a market
There was one bright note about Sofia in the report. Bulgaria narrowed its budget deficit and brought subsidies to state enterprises down to one percent of GDP (gross domestic product) in 1995. That is better than a number of countries that are generally further along in the transition process.
But IMF officials in Washington and Sofia won't say whether those developments would be enough to earn Sofia new credits to get the country through its next year of obligations.