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Bulgaria: Foreign Experts Say Sofia On Schedule For Currency Board

Sofia, 27 June 1997 (RFE/RL) -- Western financial experts say Bulgaria is now prepared to make good on its promises and establish a currency board system by next Tuesday.

Earlier this week, a report from the French-based Paribas Capital Market International Research expressed doubts that Bulgaria's parliament would be able to pass all the necessary legislation in time for the board to be implemented on schedule.

But the newly elected anti-Communist majority in parliament has been working at an unprecedented pace during the past two weeks and has now completed most of the legal groundwork.

The development is good news for cash-strapped Bulgaria. The July 1 deadline for implementing the board is seen in international financial circles as the first major test of Prime Minister Ivan Kostov's ability to implement free market reforms.

Dan McGovern, an emerging markets analyst at the Merrill Lynch brokerage firm's London office, told RFE/RL that parliament's recent rush of activity has helped boost the confidence of potential foreign investors in Bulgaria.

McGovern said Merrill Lynch analysts are among those who expect the currency board to be in place on Tuesday. He said that development would be another positive signal from a country that, in his words, "has been sending a lot of positive signals" to potential investors since Kostov took office.

The International Monetary Fund (IMF) has said that it won't disburse fresh credits to Sofia unless the currency board is implemented. By pegging the Bulgarian lev to the German mark, the system will limit the ability of the National Bank to manipulate currency exchange rates. Instead, the board will tie the lev's exchange rate to the level of foreign currency reserves held by the central bank.

Newly appointed National Bank governor Svetoslav Gavriiski announced this week that the Bank will start buying German currency at the rate of 1,000 lev per D-Mark beginning Tuesday.

Meanwhile, parliament has been passing legislation at a speed rarely seen in Sofia since 1989. One vital development this week was the approval of a plan to privatize more than 1,300 state firms. That plan envisages revenues of 360 million dollars from the sell offs.

Another key piece of legislation is a new banking law approved on Wednesday. That law tightens restrictions for setting up banks in the country and establishes regulations for announcing bank failures.

Parliament still has to pass one important piece of legislation -- an austere budget proposed by Kostov for 1997. RFE/RL's corresondent at the Sofia parliament says debate on the budget is scheduled for today, and that parliamentarians are prepared to call extraordinary sessions this weekend, if necessary, in order to push the budget through.

Merrill Lynch's McGovern says that even if the budget is not passed during the weekend, the currency board will able to begin operations on Tuesday.

And Paribas analysts say that even if the board is delayed by a few days, the problem would be "solely on a technical level." Paribas analysts are telling international investors that Bulgaria is demonstrating "a continued political commitment" to market reforms.