LESSONS DRAWN FROM THE IMFSUPPORTED PROGRAMS

1
LESSONS DRAWN FROM THE IMF-SUPPORTED PROGRAMS

• TSVETAN MANCHEV
• DEPUTY GOVERNOR
• BULGARIAN NATIONAL BANK

2
OUTLINE

• Historical facts
• Have the goals of the Fund-supported Programs in
  Bulgaria been achieved?
• Key lessons

3
HISTORY

• Membership since September 25, 1990
• 13 programs
• Types of programs
• Stand-by Arrangements (10)
• Contingent Compensatory Financing Facility - CCFF
  (2)
• Systemic Transformation Facility STF (1)
• 12 completed successfully in compliance with the
  conditionalities 1 terminated before completion
  the 4th one, concluded in 1996
• IMF financing over the years
• 2.1 bln. SDRs for 12 agreements
• 100 mln. SDRs for the 2004 precautionary
  agreement,

4
OUTSTANDING DEBT TO IMF
5
BULGARIAN SOVEREIGN DEBT SPREAD
6
Promised BUT NOT Delivered1991 1997

• Lack of political will for reforms, incl.
• setting an inconsistent monetary policy aimed at
  the achievement of both price stability and
  exchange rate stability under a floating rate
  regime
• setting an inconsistent and unpredictable fiscal
  policy
• the lack of large-scale privatization and the
  continuous dominance of the state-ownership of
  assets
• ill-focused and badly communicated economic
  restructuring and liberalization
• an excessive public debt burden and a moratorium
  on debt obligations
• the 1996-1997 crisis.

7
Promised AND Delivered1997 2001

• Political will and a wide-spread public support
  for the reforms, incl. a switch to
• a euro-based currency board monetary regime since
  mid-1997
• a prudent and predictable fiscal policy oriented
  towards debt reduction and limited financing of
  non-reformed state sectors
• an abrupt large-scale privatization of
  state-owned assets
• a well focused and consistent policy of market
  liberalization and improvement of the business
  environment
• enhanced coordination between economic policies.

8
Credible on the road to EMUFrom 2001 - to now

• Switch towards sustainable development policies,
  incl.
• enhancing the stability of the euro-based
  currency board regime and preserving this regime
  at the current exchange rate of the Bulgarian Lev
  to the Euro of 1.95583 BGN for 1 Euro until the
  euro adoption
• a prudent and predictable fiscal policy oriented
  towards a budget surplus, public debt
  restructuring and repayment, and a limited
  penchant for further debt obligations, as well
• the establishment of a functioning market economy
  capable of withstanding competitive pressures
  within the EU
• a pre-announced strategy for the euro adoption
  after the fulfillment of the Maastricht criteria
  
• an increased economic policy coordination in line
  with the requirements of the Stability and Growth
  Pact and the Lisbon Agenda.

9
LESSONS

• IMF-supported programs do not guarantee by
  themselves a sustainable development and a
  long-term growth. They are short-term looking and
  their successful accomplishment largely depends
  on the consensus of national authorities about
  the formulated policy mix
• The IMF expertise and knowledge is effective in
  crises prevention and resolution, but the
  transformation of the achieved results into a
  sustainable development model is still a
  challenge

10
LESSONS

• 3. IMF-supported Programs should remain
  short-term oriented, because it is the national
  authorities responsibility to build a consensus
  on the nationwide goals of sustainable
  development and growth
• All national stakeholders participation in the
  discussion of IMF-supported Programs is
  instrumental for their success.

11
The General Conclusion

• The political will for and the national
  consensus on reforms aimed at long-term
  nationwide (or community-wide) economic goals
  cannot be replaced by short-term IMF-supported
  Programs.

12
BEYOND AND AFTER THE IMF-SUPPORTED PROGRAMS

• Bulgaria should and will continue the
  co-operation with the IMF through
• receiving a vast technical assistance from the
  Fund (and other IFIs) and knowledge for the
  future of the global economy
• providing information on its macroeconomic
  policy, the expected effects, and building up an
  understanding and confidence among the partners.

13
Thank you for your attention!
14
Cross country comparison of GDP per capita
convergence
15
GENERAL GOVERNMENT BALANCE
16
GOVERNMENT DEBT
17
REAL GDP GROWTH
18
INFLATION
19
FOREIGN RESERVES
20
FOREIGN DIRECT INVESTMENTS IN BULGARIA
21
SHARE OF THE GROSS CAPITAL FORMATION IN GDP
22
UNEMPLOYMENT RATE
23
EXTERNAL POSITION
24
CREDIT TO THE PRIVATE SECTOR