The saga of Bulgaria’s fiscal reserve and how it was used by the government of former prime minister Sergei Stanishev is far from over, with prosecutors asked to investigate the secret deal struck by former finance minister Plamen Oresharski and central bank governor Ivan Iskrov.

The media blackout on the issue was deliberate, to allow prosecutors to carry out the investigation without distractions, Finance Minister Simeon Dyankov said in an interview on November 22.

"We sent our analysis to prosecutors. The documents I have gathered are worrying, so we sent the analysis to the Prosecutor’s Office," Dyankov said, adding that prosecutors were studying the analysis.

"This case will soon be on the public agenda, because this is just another case of duplicity, where what was being said was very different from what was being done."
Dyankov broke the news about the fiscal reserve deal on October 30 during question time in Parliament, answering a written query by his predecessor, Oresharski, who asked for clarification on Dyankov’s earlier idea to deposit part of the fiscal reserve in commercial banks, where it would earn higher interest than at Bulgarian National Bank (BNB).

Strong public opposition to Dyankov’s suggestion prompted Prime Minister Boiko Borissov to scrap the proposal.

But such an agreement was already in place in 2008, when a billion leva, about 14 per cent of Bulgaria’s fiscal reserve, was deposited in commercial banks, Dyankov said on October 30. The money was deposited in 17 banks, he said at the time.

The secret agreement that allowed this to happen was signed between Oresharski and Iskrov and included a provision that a further billion leva could be deposited in banks.
"Neither one, nor the other told me about it. It was ironic that I found out about it because Mr Oresharski asked the question in Parliament," Dyankov said on November 22.

According to Dyankov, the deal has been in place since May 2008, when the Socialist-led cabinet was still denying any possible impact from the global financial crisis on Bulgaria.
Oresharski denied Dyankov’s allegations, saying that the agreement was signed in October 2008 and was a preventative measure, meant to be put in place only if the government had to bail out banks.

He criticised Dyankov for bringing it to light: "Secret agreements should not be made public. I would not publicise issues that hold a threat to financial stability," Oresharski was quoted as saying by Bulgarian news agency BTA.

It was never enforced, save for "one minor exception", Oresharski said, but refused to give details on the nature of that exception.
Dyankov declined to give any names during his interview on November 22, saying that the prosecutors had all the necessary information.

Privileged banks
In the same interview, Dyankov said that he was intent on breaking the stranglehold that a few banks had on the flow of Government money.

"The new practice that I made mandatory is for all state companies and agencies to report, and this was not the case previously, where they deposit their funds and on what terms," he said. "It turns out that three or four banks handled the bulk of the money of state companies."

The way to deal with this situation was for the Finance Ministry to require state companies to pay overdue dividends for previous years, money that was previously deposited with banks, Dyankov said. The ministry’s initiative was yielding results, with 150 million leva collected since the change of government, he said.