Sofia to hold debt down

SOFIA (Reuters) – Bulgaria yesterday confirmed it does not intend to issue new eurobonds this year despite an expected rise in the Balkan country’s financing needs caused by the Iraq war and the weak world economy. Deputy Finance Minister Krassimir Katev told a news conference Bulgaria would cover its financial gaps this and next year with cheaper domestic borrowing. «We do not expect our (annual) financial gap to exceed 100-150 million euros, which could be easily be covered with domestic borrowing,» Katev said. «That is why our debt strategy envisages annual net domestic financing of maximum 400 million levs ($220 million) in the next several years.» Katev said another reason that allowed the government to cut foreign borrowing was the high level of its fiscal reserve, which stood at 3.34 billion levs ($1.83 billion) at end-2002. This is well above the minimum reserve of some $1 billion agreed with the IMF, with which Sofia has a loan deal. Analysts say the US-led attack on Iraq would probably reduce Bulgaria’s tourism revenue and foreign direct investment, needed to cover a current account deficit. The deficit was likely to widen this year because of a possible rise in world oil prices that would boost imports, while exports might fall due to unfavorable conditions in the European Union, Bulgaria’s main trading partner, analysts said. Bulgaria has said it planned to more than double its domestic debt at the expense of foreign borrowing to enliven the local market and lure investors ahead of 2007 when it hoped to join the EU. The government wants to cash in on strong foreign appetite for Bulgaria’s credit risk as well as domestic hunger for government paper and raise its borrowing at home. «We could easily refrain from foreign borrowing until we receive investment grade rating,» Katev said.

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