ECONOMY

Fitch ups Bulgaria

SOFIA/LONDON (Reuters) – Bulgaria’s new government was greeted with a ratings upgrade yesterday and its finance minister said he would stick to the conservative fiscal policies of his predecessor. Fitch Ratings upgraded the country’s long-term foreign currency rating one notch to ‘BBB’ from ‘BBB-‘, citing a strengthening fiscal position and falling debt. The news preceded a statement from incoming Finance Minister Plamen Oresharski, who said he would continue to aim for a balanced budget or a surplus in 2006 for the country, a candidate to join the European Union. «In principle we will aim for a balanced budget, but I am afraid of the developments of some macroeconomic parameters like the trade balance and the current account, which might make us aim for a surplus,» he told journalists after taking over from outgoing finance minister Milen Velchev. Oresharski was sworn in on Tuesday in the cabinet of Socialist Prime Minister Sergei Stanishev, who has pledged to get the Balkan state on track to join the EU in 2007. A post-election dispute over forming a new government had put that date at risk. Fitch also upgraded Bulgaria’s local currency rating to ‘BBB+’ from ‘BBB’. It said Bulgaria was set to cut its foreign debt to 30 percent of gross domestic product by the end of 2005 from 39 percent at the end of last year and around 70 percent when Velchev took office in 2001. Under Velchev, a former City of London banker and key figure in ex-king Simeon Saxe-Coburg’s ousted government, Bulgaria bought back billions of dollars in expensive bonds early and restructured other debt. But Oresharski said that process was now over. «Everything which could be bought back has been bought back,» he said. He added that Bulgaria would fulfill all its commitments to the IMF this year, which include a 2005 fiscal surplus target of around 400 million levs ($252.2 million), or 1 percent of GDP. Oresharski, who was deputy finance minister in Ivan Kostov’s 1997-2001 right-of-center government, pledged an even more conservative stance than Velchev, who was praised by foreign analysts for slashing debt and keeping a tight hold on spending. Upgrade expected Analysts were little surprised by the Fitch upgrade, saying it had been expected as Bulgaria’s financial position improves. «Clearly from their debt management perspective they have made all the right moves in the last four years of the (previous) government,» said IDEAGlobal analyst John Davitte. Standard & Poor’s said it would keep its positive outlook on Bulgaria for now as it waits to see the new government’s fiscal policies and progress on the budget, but said prospects for it hiking its BBB- rating for the country were bright. «The new Finance Minister Oresharski – I’d see him as a safe pair of hands. He is someone I would expect to continue the prudent policies Bulgaria has pursued in recent years,» said S&P sovereign credit analyst Konrad Reuss. Bulgaria’s external sovereign bonds initially pushed higher on the Fitch upgrade news before pulling back to modest gains. The country runs one of Europe’s tightest fiscal policies as a currency board regime introduced in 1997 pegs the lev to the euro and demands strict fiscal prudence.