ECONOMY

Sofia worries over IMF talks in costly year

SOFIA – Flood-hit Bulgaria faces tough talks with the International Monetary Fund this week over budget spending by the end of the year, Finance Minister Plamen Oresharski said yesterday. «The talks with the IMF will be very difficult, especially on agreeing on the end-year fiscal balance due to some imminent spending. This is obvious,» Oresharski told national radio BNR. Torrential rains since May have ravaged large parts of the country and incurred damage of up to 1 billion levs, prompting additional budget spending, which the IMF fears might further worsen Bulgaria’s wide current account gap. IMF head of mission Hans Flickenschild, who arrived on a three-day visit to Sofia, said the government could get aid from abroad to cover for the losses, redirect other spending and only after that it could consider raising overall expenditure. «Certainly it is a priority for the government to address the most urgent needs for repairing the infrastructure. But one has to see how to go about it,» he told reporters upon arrival. «What concerns us is the continued further deterioration of the external current account that has widened beyond what we have foreseen.» The EU aspirant state’s current account gap, which might lead to economic overheating, has ballooned to 9.2 percent of gross domestic product on an annual basis at the end of June, up from the IMF’s previous forecast of 7.9 percent, Flickenschild said. Under its two-year non-funding agreement with the IMF last August, Bulgaria has committed to save 70 percent of outperformed revenue this year and produce a budget surplus of 400 million levs or one percent of GDP. The country has vastly overshot its revenue targets and the budget surplus in the first half of the year was 1.1 billion levs, almost 3 percent of GDP. On Friday Oresharski told Reuters he saw the end-2005 surplus in the range of 1 to 2 percent of GDP, or around 800 million levs, and vowed to maintain fiscal prudence despite the urgent payments needed to cover for the floods. Bulgaria operates under a currency board regime, and fiscal policy is one of the few tools it has to help control the country’s current account.