Bulgaria’s fiscal discipline seen untouched by politics

SOFIA – Bulgaria is unlikely to waver from its path of strict fiscal discipline regardless of who wins national elections on June 25, the International Monetary Fund’s representative in Sofia said yesterday. Analysts say the opposition Socialists – expected to win the ballot and lead Bulgaria into the European Union in 2007 – pose a higher economic risk than the incumbent centrists led by ex-king Simeon Saxe-Coburg. But IMF representative James Roaf said the Balkan state’s strict currency board regime, the need to already prepare for eurozone membership and a political consensus to follow IMF advice should keep the country on track. «Provided the next government is willing to live in the constraints of an IMF program, as all major parties have said, then by definition macroeconomic risks will be contained,» he told Reuters in an interview. Under the IMF’s guidance, Saxe-Coburg’s government has registered two years of budget surpluses, slashed public debt and overseen growth of over 5 percent annually. The Socialists, ousted after an economic meltdown in 1997, are now eager to prove they are equally adept, and have pledged to work with the Fund, maintain a balanced budget, and keep the currency board pegging the lev to the euro until Bulgaria adopts the single currency in 2009 or, more likely, 2010. But with voters crying for higher salaries – wages average just 150 euros a month – the party has promised 20 percent public wage hikes next year and to raise spending in healthcare, education and other areas. Roaf refused to mention any party’s program specifically, but said any government to emerge from the election should avoid the temptation to run «irresponsible» fiscal policies. «Within the constraints of the IMF program, there’s no room to do that and in the constraints of the ERM-2 after joining the EU, any party would not be able to do it either without being at risk of missing the Maastricht criteria.» The IMF calls for strict adherence to the currency board, in place since the crisis, under which the government must observe fiscal prudence and offset the external deficit with incoming funds, either through investment or borrowing. Reforms still needed Roaf said the Black Sea country should press ahead with key reforms to improve the business climate if it wanted to sustain high foreign investment inflows – measured at 2.1 billion euros last year – as privatization revenues dry up. He said chief among them were steps to overhaul the slow and easy-to-corrupt judiciary, simplify the business register, cut red tape, improve rule of law, and launch badly needed infrastructure projects. «It’s not a given investment will continue flowing if these are not tackled,» he said. «Bulgaria is not only competing as a low-cost center in the EU. This is a global environment.»

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