Bulgaria Won’t Sell Eurobonds as Deficit Widens, Hristov Says

Bulgaria's Deputy Central Bank Governor Kalin Hristov. Photo by BGNES

By Irina Savu and Elizabeth Konstantinova

Bloomberg agency

Bulgaria won’t sell Eurobonds even as this year’s government deficit is set to exceed previous forecasts, Deputy central bank Governor Kalin Hristov said.

“The Finance Ministry doesn’t want to sell Eurobonds currently to cover the budget deficit,” Hristov said in an interview in Bucharest today. “They’re going to use the fiscal reserves worth 6 billion leva (.74 billion) and some 800 million leva from commercial banks.”

Bulgaria’s fiscal deficit will widen to 4.8 percent of gross domestic product this year from 0.8 percent previously forecast, Hristov said, as slower economic growth depletes tax revenue. Europe’s sovereign debt crisis is sending financing costs soaring across the region, with the Balkan countries most at risk from contagion from Greece’s fiscal collapse, according to Capital Economics.

Finance Minister Simeon Djankov on May 5 said the government was planning debt sales to fund infrastructure projects and increase social benefits as the European Union’s poorest member tries to spur demand. The public deficit will be 2.8 percent this year, compared with 3.9 percent in 2009, Djankov said then.

Credit default swaps on Bulgarian five-year debt have jumped 57 basis points since the end of March to 250 basis points, signalling a perceived deterioration in the country’s credit quality in the period.

According to the central bank, Bulgaria’s recovery from last year’s 5.1 percent contraction will be weaker than the government is estimating.

“We have different views from the government in terms growth forecast,” Hristov said. The central bank predicts gross domestic product will expand 0.5 percent this year, compared with the government’s estimate of 1 percent, he said.

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