News from Bulgaria / Jan 25, 96

From: [email protected] (Embassy of Bulgaria)

Bulgarian Telegraph Agency Directory

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

BULLETIN OF NEWS FROM BULGARIA

CONTENTS

[01] DEMOCRATIC LEFT GOVERNMENT OVERFULFILLED ITS 1995 PROGRAMME

There were significant positive changes in the social sphere in 1995. Results show that for the first time since 1992 real wages went up. At the end of 1995 wages in the non-state-financed sector alone went up 5.74 per cent from the end of 1994. The wage increase for the country was 2.72 per cent. The minimum old age pension went up 3.22 per cent and the average pension - 8.83 per cent. At the end of 1995 unemployment in the country was 10-11 percent, which is lower than the figures for states such as Spain and Finland.

What was done in the social sphere, however, is just a small part of what has yet to be done in practice, Gechev said. Real incomes and pensions are still rather low. The Government plans to put an end to impoverishment this year; real incomes will go up over the next few years.

Data about the balance of trade and the balance of payment show a trade surplus of about 500 million US dollars and a favourable payment balance of 100 million US dollars, Gechev said. The Bulgarian Government fulfilled its commitment to increase the foreign exchange reserve as well.

The 1995 gross domestic product (GDP) is expected to register a growth of at least 2.5 percent, quite possibly even 3 percent. According to the Government's programme, GDP should grow 4 - 4.5 percent by the end of 1998, the Deputy Prime Minister recalled. The Cabinet hopes that the private sector will account for 60 - 65 percent of GDP as projected in its programme when mass privatization is completed.

The Government was far than successful in curbing inflation. Nevertheless its 1995 figure of 32.9 percent is too high for Bulgaria, Gechev said. The Cabinet will try to reduce it to 20 percent in 1996 and down to an annual of 10 percent at the end of its tenure.

The commitments assumed in regard to the structural adjustment of the economy and in regard to privatization have also been met, Gechev said. There is some delay in the licensing of privatization funds which should have started in the end of the third quarter of 1995, he said. The public awareness campaign for mass privatization is inadequate.

The cash privatization programme was not brought to the end, mainly because it was unrealistic and involved sluggish bureaucratic procedures, Gechev said. Besides, there was a considerable drop in direct foreign investment. According to Deputy Prime Minister Gechev, the main reason for it is that no large enterprises were put up for privatization.

On Ferbuary 2 members of the Cabinet's economic team will meet with representatives of the 20 biggest foreign companies in Bulgaria to discuss the problems foreign investors are facing.

Meeting its other commitments, the Government adopted a programme for the rehabilitation of the banking system, reduced the base interest rate in parallel to curbing inflation and stabilized foreign exchange rates.

Deputy Prime Minister Gechev is moderately optimistic about the successful outcome of negotiations with the international financial institutions. In his opinion, the good results achieved in 1995 will make it easier to negotiate the finance and economy structural adjustment loan with the World Bank and the stand-by agreement with the International Monetary Fund. However, the Deputy Prime Minister repeated once again his position that the Government would not sign the agreements at any cost.

[02] GOVERNMENT'S SOCIAL PROGRAMME IN 1996

[03] PRIME MINISTER VIDENOV RECEIVES GERMAN MP

Gernot Erler expressed satisfaction with his meetings in Bulgaria. He emphasized the readiness of the Bundestag group for friendship with Bulgaria to extend expert aid to the Bulgarian National Assembly in drafting new laws.

The sides agreed that 1996 offers new opportunities for further advancement of Bulgarian-German relations. The forthcoming visits of high-level government officials and MPs are a good prerequisite in this respect. The establishment of a German-Bulgarian forum would help popularize Bulgaria and its reform.

Erler wanted to know if the Bulgarian Government is ready to take active part in the implementation of the Dayton peace accords, saying he was prepared to assist in the indirect compensation of the losses Bulgaria suffered as a result of the application of UN Security Council sanctions on Yugoslavia. and sa

Gernot Erler met with the leader of the Union of Democratic Forces, Ivan Kostov, today. Kostov acquainted him with the position of the Union on the performance of Zhan Videnov's Cabinet and the actions the opposition had taken against the government of the Bulgarian Socialist Party.

This evening Gernot Erler read a lecture on "Dayton and consequences for Bulgaria's security policy" at the Evropa Hotel. Erler was a guest at the Science and Policy Permanent Forum with the the New Bulgarian University.

[04] MATE GRANIC: "BULGARIAN - CROATIAN RELATIONS"

[05] PARLIAMENT RATIFIES BULGARIAN-MONGOLIAN TREATY

The Treaty lays the foundations of a new stage in Bulgarian- Mongolian relations and is a step to improving the legal basis of bilateral cooperation. It places bilateral relations on the basis of mutual interest and maps out the guidelines in trade and economic cooperation and cooperation in investment, science, and environment protection, the ratification act says.

[06] PARLIAMENT CHAIRMAN TRIES TO SHIELD P.M. AGAINST

Sendov motivated his refusal pointing out that Kostov had already asked the Prime Minister the same question. "The Parliament Chairman tries to shield the Prime Minister against an awkward question," Kostov said. "I insist that Videnov answers the question if he or other BSP leaders got funds from members of the Orion group," he stated.

The UDF leader promised to cite evidence and prove his accusations after receiving Videnov's reply. "If Zhan Videnov denies that the BSP was sponsored by Orion, I am going to prove that the money went directly to the Prime Minister or some of the other members of the BSP leadership," the UDF leader said.

"As far as I know, the Orion grouping is non-existent in economic and legal terms. It is a circle of friends," Prime Minister said at a recent news conference invited to comment on press publications that linked some economic groups to members of his Cabinet. At the same news conference Videnov expressed his assurance that the public servants belonging to that circle complied with all legal requirements and that their economic functions were not incompatible with the ones performed by them "I deny any links and reject any insinuations that the Government of the Democratic Left is linked to Orion or any other group," the Prime Minister stressed at the time.

On Monday UDF leader Kostov told reporters that Orion was "one of the groups of organized crime the BSP is connected to". "We insist that this should be called mafia," he emphasized after his meeting with President Zhelyu Zhelev, at which besides home and foreign policy, the two discussed the one-year tenure of the BSP Government. Kostov said that the UDF had evidence to prove this connection but had to collect additional information before making it public.

Expressing the UDF's view, Kostov told President Zhelev that "the BSP Government is harmful and dangerous for Bulgaria" and that "it must go". According to Kostov, he and the President agreed that the opposition should be united, that it should act as a single entity and bring down the BSP Government. "If the crisis deepens, we will act together," President Zhelv told reporters after his meeting with Kostov and specified he would act within his constitutional powers.

[07] BDZ EXPECTS REPAYMENT OF USD 20.230 MLN

After the lifting of the Yugoembargo 40 trains run to the former Yugoslav republic every 24 hours as against 60 before the embargo was imposed. As of the beginning of the year BDZ transported 1.762 million tons of cargoes which is 233,000 tons more compared with the same period of 1995, it emerged at the news conference.

Thirteen local lines will be closed by the end of this year's six month period, Dimitrov said. However, those of them which connect industrial enterprises will be offered for sale to the enterprises' owners.

[08] BUSINESS PRESS

"Standart News" cites Deputy Prime Minister and Minister of Economic Development Roumen Gechev that banks will not be divided into state and private in imposing sanctions for failure to meet the minimum capital requirement. The central bank will decide tomorrow what to do with lending institutions which do not meet the new requirement of 450 million leva capital for an internal licence and 800 million leva capital for a full licence.

The oil refinery in Bourgas (on the Black Sea) will restore its positions in the former Yugoslavia as one of the major suppliers of diesel fuel, petrol and other oil derivatives, "Pari" writes.

A new passenger and cargo terminal will be built at Sofia Airport by the end of 1997, according to the airport's general plan cited by several papers, thus increasing the airport's capacity to 3.5 million passengers and 60,000 tonnes of cargo a year.

The State Fund for Reconstruction and Development does not intend to impose a moratorium on the loans it is extending, "Standart News" and other dailies cite Todor Palazov, chief secretary of the Fund, as saying. He denied reports that the Bulbank initiative would block the work of the Fund.

[09] EX-CENTRAL BANK CHIEF ON BULGARIA'S FINANCIAL PROBLEMS

Vulchev expressed his conviction that the central bank will keep functioning well under Filipov's leadership. "We worked together for five years and I do not question either his personal, or his professional qualities," he said. Vulchev emphasized Filipov's name headed a list the former compiled at the Democratic Left's request.

The central bank has a skilled staff and low staff turnover, the outgoing chief said. The bank's forex reserves exceed 1,200 million US dollars, with the nation due to pay less than 130 million dollars on its foreign debt.

"We are maintaining a steady exchange rate and have kept the nation's forex reserves," Prof. Vulchev assured. The BNB is stronger than all players on the forex market combined, and speculators do not dare risk, which ensures market stability, he went on to say.

For the central bank, inflation is a serious problem that threatens to aggravate further judging from the inflation trends in the past 2-3 months, Prof. Vulchev said adding the BNB will do its best to avoid this.

Another major problem for the central bank is the servicing of the external debt. However, the bank has sufficient reserves to make the payments due until the second and even the third quarter of 1996, the former central bank governor said. Negotiations are under way with the World Bank on projects involving Bulgaria and there is a likelihood for the fourth stand-by lending agreement with the International Monetary Fund be signed in February, Vulchev said.

The banking system in Bulgaria is undergoing a liquidity crisis, said Vulchev. There is a leva shortage but this is not yet a catastrophe, according to him. The Bulgarian Foreign Trade Bank, the State Savings Bank and some of the new banks meet fully the requirements, he said. He believes that as a whole the capital adequacy of Bulgarian banks is not very bad compared to that in Hungary and Poland.

The BNB is not a Ministry of Banks and the effective laws give it no controlling powers, Vulchev said commenting on press commentaries criticising the BNB policy. He said the central bank can control only the opening of overseas bank branches and banks' overseas investment.

According to Vulchev, the difficulties facing commercial banks are the result of what he described as "their uncontrollable expansion", "incredible investment" and "expenses outstripping those of the government, the BNB and Parliament". He said the Prosecutor's Office and magistrates are also to blame for the problems since their inaction allows state and private companies to get away with unpaid debts.

The BNB cannot maintain forever a stability in the banking sector and does not intend to keep feeding fresh money in it, the former central bank governor said. Restrictions will be imposed on some banks and financial houses; smaller banks may even be closed down, he said.

"However, we cannot allow big banks to go bankrupt," Vulchev said. The BNB last year bought AgroBusiness Bank for 1 lev and took over its liabilities to prevent its failure hitting small investors. 1995 saw the failure of many financial structures and the purchase of AgroBusiness Bank was a way to avoid tension, Vulchev explained. The BNB has been monitoring closely commercial banks for a long time now, Vulchev said adding that it, for example, has been persistently urging First Private Bank to take measures for stabilization. The BNB does not interfere in politics and will work loyally for any government that is not violating the financial laws of this country, he said in conclusion.

[10] SWITZERLAND EXTRADITES BULGARIAN BUSINESSMAN DORON