There should be no modifications or speculations when it comes to the currency board, Bulgarian National Bank governor Ivan Iskrov told the fourth meeting of business and government representatives hosted by Kapital weekly.

"The currency board is either there or it’s not there," Iskrov said, citing as a bad example the modified currency board system implemented in Argentina. The South American country dropped the mechanism in 2002 after plunging into recession, which snowballed into depression that gave way to recovery later in the year.

Iskrov argued that Bulgaria’s currency board peg of 1.95583 leva for one euro secured predictability and was an "essential preface to stability." He said that the existing clear strategy left no room to experiment.

Iskrov's address came after Ivo Prokopiev, chairperson of event co-organisers Confederation of Employers and Industrialists in Bulgaria, backed the idea by economics professor Ilian Mihov of French business school INSEAD about introducing a modified currency board system, where the state keeps inflation at bay by issuing bonds during economic expansion.

The currency board saved Bulgaria; in times of crisis, the last thing a state needs to do is change the currency board mechanism, Postbank chief executive Anthony Hassiotis said.

Asked by Iskrov whether he would invest in Bulgaria without a currency board, Hassiotis said the government should not stir up insecurity that could scare away foreign investors.

The central bank expects Bulgaria's economy would hit the bottom of the recession in the final quarter of 2009 and the first quarter of 2010, Iskrov said. The negative trends will start to subside towards mid-2010 and a recovery of up to 0.5 per cent could be expected in the second half of 2010. In case of a slower rebound of the global economy, Bulgaria's economy could shrink by 0.2 per cent decline in 2010, but gross domestic product is expected to grow by 4.9 per cent in 2011, Iskrov said.

Source: Dnevnik