IMF approves 2-year loan for Bulgaria

WASHINGTON (Reuters) – The International Monetary Fund on Wednesday approved a two-year standby loan for Bulgaria worth $299 million. The lender said in a statement that $40 million is available immediately under the loan, which replaces an earlier three-year deal that expired in September of last year. The approval comes hard on the heels of a $450 million commitment from the World Bank over the coming three years, which was announced earlier on Wednesday. «The fund supports the Bulgarian authorities’ economic program centered on the currency board arrangement, prudent and flexible fiscal policy, a strict incomes policy, and privatization and other structural reforms,» IMF Deputy Managing Director Shigemitsu Sugisaki said. «This program offers good prospects for rapid sustained growth, sound external balances, and lower unemployment and poverty,» he added. The IMF said the outlook for the coming year was «generally favorable,» forecasting economic growth in 2002 of 4 percent, down from about 4.5 percent in 2001. It added that inflation should remain subdued this year. The IMF urged Bulgaria, which has a population of about 7.8 million, to continue fiscal and structural reforms, enhance revenue collection by improvements in tax and customs administration, and also to further strengthen the social safety net and gradually lower direct tax rates. It also urged that the last two large public banks be sold to well-qualified strategic investors, structural impediments to private-sector credit growth eliminated, and the privatization of non-infrastructure enterprises finalized. The latest program commits Bulgaria to lower the budget deficit gradually from the targeted 0.8 percent of GDP in 2002 to balance in the medium term. In 2002, while the overall deficit is expected to decline, the primary surplus would be reduced from 3 percent of GDP in 2001 to 2.4 percent in 2002.