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Bulgaria: World Bank Adopts New Assistance Strategy

Sofia, 13 May 1998 (RFE/RL) -- The World Bank's adoption of a new country assistance strategy for Bulgaria is seen in Sofia as an endorsement of what the government has done and where it is going.

A Ministry of Finance spokesman says: "The Board of Directors had to choose between two versions of strategy - optimistic and pessimistic (and) it chose the first."

The spokesman says that if the pessimistic view had been adopted, the bank would have only used the lower loan level of $300 million instead of the higher one.

In the strategy, the bank says that if Bulgaria continues to push ahead forcefully on reforms, it is willing to consider structural adjustment loans of up to $300 million and investment financing of up to $400 million over the next three years.

"This means that if we fulfill certain conditions, the World Bank will finance Bulgaria with up to $700 dollars until 2001," the spokesman says.

The loans and investments would come from bank, it's International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA).

The bank's support is predicated on continued compliance with International Monetary Fund (IMF) programs, it said.

The last time the World Bank formulated a strategy for Bulgaria was in May 1996, when the government of the Socialist party was still ruling the country. Taking into account the unsatisfactory progress of structural reform at that time, the bank's board then adopted a far more pessimistic approach, says the finance ministry spokesman. At that time, it envisaged financial support of not more than 200 million dollars, to be used mainly for social, ecological and medical projects. The spokesman says the bank told Bulgarian authorities then that if they speeded-up the process of privatization and restructuring the economy, the strategy would be revised.

Last May, when the bank's Bulgarian country director Kenneth Lay visited Sofia, it became clear that a new strategy for Bulgaria was being considered, says the finance ministry spokesman. This was less than a month after the landslide victory of the Alliance of Democratic Forces in the April 1997 parliamentary elections. In September, at a specially arranged meeting, the new cabinet presented Lay with its priority projects.

The finance ministry spokesman says priorities for Bulgaria under the strategy are privatization, pensions, medical care, agriculture, administration, and banking sector reform. These areas are in addition to developing a better social safety net to protect the most vulnerable in society.

Some of the requirements will be difficult to accomplish, says the spokesman. By the end of the current year the planned 40 percent privatization of state assets should be increased by 10 percent, he says, with the target in both 1999 and 2000 at least another 15 percent. Thus in 2001, all state enterprise ownership would end.

To achieve this, says the spokesman, the government will have to remove all obstacles to the sale of infrastructure enterprises such as oil refining, natural gas extraction and transport, and mining.

At least two more state-owned banks should be privatized this year, says the spokesman, and 51 percent of the shares of Bulgarian Telecommunications must be sold. By mid-1999, he said, all trade restrictions should be removed, while all land should be returned to its owners by mid-2000.