IMF: Bulgaria's Revenue Target for 2014 Too Ambitious

The mission was headed by Ms. Michele Shannon, who assumed earlier this year mission chief responsibilities for Bulgaria. This was Ms. Shannon's second visit to the country. Photo by Bulgaria's Finance Ministry

The International Monetary Fund has expressed concerns over a too “ambitious” revenue target in Bulgaria's 2014 budget, but believes that the deficit target is achievable.

“We see some risks in terms of revenue -- it’s a very ambitious target,” Michele Shannon, IMF mission chief, told reporters in Sofia at the end of an annual review visit.

“Revenue may underperform if the domestic demand recovery is slower than projected, gains from administrative reforms are lower than budgeted, or, as projected by the mission, inflation remains subdued. Thus, expenditures may need to be restrained to achieve the deficit target.”

“Bulgaria is characterized in Europe and in the region by its low public debt levels, which is seen as a strength,” Shannon said.

“We believe that the government’s plans [to borrow a total of BGN 3.8 B on global and domestic markets next year] are consistent with prudent debt levels. We don’t see that as a key risk.”

The financial system remains stable, well capitalized, and liquid, but profitability remains low, the IMF said in an official statement.

Prudent supervisory policies have resulted in a high system-wide capital adequacy ratio of 16.9%, comfortably above the 12% regulatory minimum, and aggregate Tier 1 capital is 15.6%.

Gross NPLs are 17.2% of total loans but are well provisioned, and NPLs net of IFRS provisions are 10.6%.

Weak credit demand and strong deposit growth have boosted liquidity, allowing banks to further reduce external financing, the IMF said.

FULL text of the concluding statement of IMF mission to Bulgaria READ HERE

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