THE domestic debt will continue to rise gradually over the next year and is expected to reach 20 per cent of the country's state debt by the end of 2004, Bulgarian Deputy Finance Minister Krassimir Katev told representatives of the Bulgarian Dealers Association at a meeting last week. The planned increase will be carried out at the expense of foreign debt reduction. Bulgaria will not launch government bond issues on foreign markets in 2004, according to the finance ministry's debt management strategy. Total payments for servicing the country's state debt, including domestic and foreign debt, are projected at 1.823 billion leva for 2004.

The new budget draft stipulates that the maximum amount of the state debt and the guarantees the Bulgarian government can take in 2004 must not exceed 2.2 billion leva, compared to 2 billion in 2003. Under the same document the finance minister will be able to issue bonds worth up to 800 million leva on the international markets. The limit for 2003 was set at one billion leva. The draft also allows the finance minister to issue government securities to buy back domestic or external sovereign debt, provided the state debt does not exceed the end of year limit of 19.9 billion leva. He can sign agreements for foreign exchange and interest swaps and to pay debts in advance.

The gross external debt as of the end of August was $11.832 billion, BNB data shows. The amount represents 62.6 per cent of GDP. The debt has increased by $671.9 million or 6 per cent since December last year when it was $11.16 billion or 71.7 per cent of GDP. By the end of August 2003 long-term liabilities amounted to $9.733 billion or 82.3 per cent of the total debt and short-term liabilities - $2.098 billion or 17.7 per cent. However, denominated in euro the gross external debt has decreased. It was 10.696 euro as of the end of August and had fallen by 53.9 million euro or 0.5 per cent, compared to 2002 when it was 10.749 billion.

Public sector foreign debt amounted to $8.513 billion or 45 per cent of GDP as of the end of August this year, increasing by $247.4 million against the end of December 2002 when it was $8.266 million or 53.1 per cent of GDP.

As of the end of August, private sector foreign debt amounted to $3.318 million or 17.6 per cent of GDP, increasing by $424.5 million or 14.7 per cent against the end of 2002. Then it was $2.894 billion, 18.6 per cent of GDP. Again as of the end of August, the BNB data shows that private commercial banks debt was $444.2 million, up by $6.5 million. The stock of private non-financial sector debt, $2.874 billion, increased by $417.9 million compared to the end of December 2002.

Analysed in terms of instruments at the end of August this year, bonds counted for 38.1 per cent of the gross external debt of the country and were worth $4.510 billion, financial loans were 49.5 per cent or $5.851 billion, trade credits - 9.8 per cent or $1.156 billion, and deposits - 2.7 per cent or $314.2 million.