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Bulgaria: IMF Meets With Key Parties About New Loans

By Petko Georgiev, Ivo Indzhev and Ron Synovitz

Sofia, 13 March 1997 (RFE/RL) -- The International Monetary Fund (IMF) is seeking assurances today from each of Bulgaria's top political parties that they will abide by an agreement for a new standby loan if elected next month.

Michael Deppler, director of the IMF's First European Department, says the standby agreement is likely to be finalized with the caretaker government soon. But after talks in Sofia with President Petar Stoyanov yesterday, Deppler said the first tranche of fresh credits will not be released before the April 19 parliamentary ballot.

Deppler today has meetings scheduled with the anti-communist Union of Democratic Forces (UDF) and People's Union, as well as with the former Communists of the Bulgarian Socialist Party (BSP).

Today's "Financial Times" quotes Deppler as saying that "differences still have to be cleared up" before the standby agreement is finalized. He said the IMF wants Bulgaria to join other Central European states and achieve economic growth with low inflation. But he said "I have to be convinced that the policies accepted by the caretaker government will win wide support and will also be followed by the next government."

Bulgaria has plunged into economic chaos in the past year, with its currency collapsing and hyper-inflation forcing most Bulgarians to use their savings just to buy food. The state statistical office, which is still controlled by appointees from the BSP, claims monthly inflation has been about 40 percent since the new year. Those figures infuriate Bulgarian consumers who have watched food prices rise on an hourly basis at monthly rates of more than 250 percent since mid-January.

The IMF blocked disbursements on a $580 million standby loan to Sofia last year after more than a dozen private and state banks collapsed. The IMF insists on real market reforms to be implemented and a currency board system to stabilize the economy before releasing more credits. The currency board would link the domestic money supply to hard currency reserves in the National Bank.

RFE/RL correspondents in Sofia report that an agreement between Sofia's caretaker government and the IMF was drafted last week. But the German-owned Sofia daily, "24 Chasa," quotes caretaker Prime Minister Stefan Sofiansky as saying that Bulgarian parties disagree over details. RFE/RL correspondents in Sofia report that the parties disagree about how to resolve the banking crisis.

Another German-owned daily, "Trud," quotes Sofiansky as saying that Sofia wants guarantees of "adequate help" if the IMF recommendations are met.

Our correspondent in Sofia reports that the IMF wants four ailing Bulgarian banks to be sold off before the end of this year, and two state banks to be managed by reputable foreign investment institutions before being sold off as well. The Bulgarian side prefers to let the banks recapitalize and seek outside investors on their own.

Deppler has declined to discuss the differences, saying only that he hopes an agreement will be reached sometime next week.

Recent comments from Harvard University economist Jeffrey Sachs also could be complicating the talks. Sachs, who recently agreed to become an economic adviser to Stoyanov, warned against the restrictive implications of a tight monetary regime.

The "Financial Times" quotes Sachs as saying that a currency board is a good idea for Bulgaria, but the solution needs to "move to a more flexible system in the longer term."