Bulgaria Govt's Allies Insist on Getting IMF Bailout Aid

Bulgaria's rightist leader Ivan Kostov (standing) has demanded that government should ask the IMF for a bailout loan. Photo by BGNES

The right-wing Blue Coalition, which supports in principle Bulgaria’s ruling GERB pary, has warned against the use of funds from the country’s fiscal reserve.

Top-ranking representatives of the Blue Coalition stated at a special news conference on Wednesday that the Borisov government was risking a lot by withdrawing money from the fiscal reserve.

Their strong reaction came a day after a media report revealed that the GERB Cabinet has approved a revised 2010 state budget law to allow the fiscal reserve to slump from BGN 6.4 B to BGN 4.5 B at the end of the year; there is no formal confirmation of the report but the government is alleged to have tabled it to the Parliament.

The government should issue bonds for about EUR 1 B on the free EU market, and should not touch the fiscal reserve any more, insisted the leaders of the Blue Coalition. Meanwhile, the Finance Ministry announced that in April 2010, Bulgaria’s fiscal reserve grew by BGN 200 M up to BGN 6.6. B.

The right-wing MPs, which generally back Prime Minister Borisov with their votes, think that the government is ready to withdraw BGN 2 B from the reserve in order to cover the budget deficit which will be approximately the same amount by the end of the year.

The Blue Coalition has forecast a 2010 budget deficit of 5% of the GDP, or over BGN 3 B. Preliminary data of the Finance Ministry places the deficit at BGN 1.46 B for the first four months of 2010.

Ivan Kostov, former PM (1997-2001) and Co-Chair of the Blue Coalition, went as fas as saying that Bulgaria had to revise the state budget for 2010 before the summer break of the Parliament, and had to seek a bailout loan from the International Monetary Fund immediately after the budget law is amended.

“This is absolutely necessary given the inability or the unwillingness of the ministers to carry ot the necessary reforms in order to bring down the deficit. There is an express train driving against the state at breakneck speed, and we have to react on time,” Kostov warned.

The other Blue Coalition Co-Chair, Martin Dimitrov, warned that the government is on its way to “consume” the fiscal reserve, and to leave the country without a fiscal buffer for protection of its finances.

He put forth two steps – slashing all possible state spending and administration structures, and delaying all state payments that are not absolutely necessary. He further warned that the budget troubles might become the reason why Bulgaria may be unable to overcome the economic crisis soon.

Dimitrov also said the high budget deficit will lead to increased interest rates for households and firms, and the use of fiscal reserve money will affect negatively the country’s credit rating, which will worsen even more the interest rate situation.

The fears expressed by the Blue Coalition were repudiated by GERB MP Stoyan Mavrodiev, who said right-wing allies of the government have not actually seen any proposal of the government to reduce the fiscal reserved down to BGN 4.5 B, which is why their concerns were unwarranted.

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