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1997 in Review: The Year of Bulgaria's Recovery

  • Petko Bocharov

Sofia, 2 January 1998 (RFE/RL) -- After 45 years of Stalinist totalitarianism and seven years of identity crisis, 1997 was a year of major change for Bulgaria.

A spontaneous bloodless revolution took place in the big cities in January, overthrowing the party of the former communists and leading to early parliamentary elections in April.

A second major development followed -- the comprehensive political, economic and social reform that the new government of the Alliance of Democratic Forces started mid-year. Reform has been accelerating since.

In fact, 1997 was the first real year of Bulgarian post-communist economic recovery.

On July 1, the government, in consultation with the International Monetary Fund (IMF), introduced a Currency Board and tied the lev to the German mark at an exchange rate of 1000 to 1.

The IMF recommended the step because the financial system had collapsed, banks were closing, national production was falling, unemployment was rising and inflation was soaring.

Six months later, the board was able to restore monetary discipline. Interest rates and inflation went down. The IMF, World Bank, consulting companies and European bankers all acknowledged good progress.

Perhaps even more significantly, the developments have restored hope. The public opinion agency MBMD found in poll results announced Monday that 54 percent of Bulgarians say they expect to be better off in 1998. Fewer than a fourth of the respondents say they don't.

In mid-October, parliament passed a foreign investment law specifying that in order to receive priority, an investment project must be worth the equivalent of $5 million and promise to create at least 100 new jobs.

Such priority investments are to be granted a 50 percent income tax break over 10 yeaars. Analysts are predicting a boom in foreign investments in Bulgaria starting next summer.

Foreign investment in Bulgaria from 1989 until October 1997 amounted to $1.2 billion. A mild, but promising, flow of investment seemed to begin after the new government came to power.

In 1996, leading rating agencies gave Bulgarian investment the rock bottom classification of B-3. Ratings have begun slowly to rise.

During 1997, foreign currency reserves rose to a record $2.4 billion dollars.