The executive board of the International Monetary Fund (IMF) has completed the third review of the Bulgarian Government’s performance under the economic and financial reforms programme under the precautionary stand-by arrangement with the IMF, the Finance Ministry said on August 3.

The agreement, which was extended by six months, is Bulgaria’s last and will play the role of a bridge to EU accession.

On the whole, the Government’s economic programme, based on a prudent fiscal policy, credit growth restrictions and structural reforms boosting competitiveness, aims to ensure a stable economic and political framework and to prepare Bulgaria to a large extent for EU accession from January 2007.

By making this positive decision, the board highly commended the Government’s policy leading to macroeconomic stability through a prudent fiscal policy and continued structural reforms.

Statements made at the board meeting noted that despite increased external challenges and risks, Bulgaria had made further progress in strengthening the principles of a market-oriented economy and had carried out considerable financial and economic reforms clearly directed to European integration.

The executive board expressed confidence that the progress made under the programme sent positive signals to the international economic elite and guaranteed that Bulgaria would further maintain its macroeconomic stability.

The IMF is preparing to withdraw from the active monitoring of Bulgaria’s macroeconomic stability. This process however, will occur over the next eight months due to an agreement reached between the IMF and the Cabinet that will lead to a six-month extension of Bulgaria’s accord with the fund, starting from October 2006.

The current stand-by agreement ends in September, leaving a three-month gap till Bulgaria’s expected entry to the EU in January 2007, providing possibilities for macroeconomic insecurity and unclear fiscal policy.

Since 1997, Bulgaria has operated under an IMF-advised currency board system, a strict straitjacket that deprives the central bank from its monetary policy functions and pegs the exchange rate of the Bulgarian lev to the euro, sheltering the currency from foreign exchange volatilities.

Effective implementation of the six-month extended arrangement will continue in the first three months of the extension period, until the end of 2006, and the next three months will be a time for drawing conclusions and for the IMF executive board to compile a report on the implementation of the programme for Bulgaria. The country is not receiving any financing from the IMF under the current arrangement.