THE International Monetary Fund (IMF) mission was useful and the sides have narrowed the difference between their positions, Foreign Minister Milen Velchev told a news conference Wednesday after the end of the latest IMF mission.
The mission was in Sofia for a second review under the two-year, $300-million standby arrangement for Bulgaria.
A memorandum on the Government's economic policy in 2003 was negotiated at a final meeting Tuesday that was attended by other ministers as well.
The Government and the IMF have not yet reached agreement on some of the parameters of the 2003 draft budget. The IMF Mission does not contemplate another visit here in December but would do so if necessary, said IMF Mission leader for Bulgaria Jerald Schiff.
An agreement on the review should be reached by January, but if necessary the talks can last longer than that, Schiff said. In his words, Bulgaria will not get another standby arrangement tranche if the second review is not completed.
Velchev said that the tranches were not the most important goal of the arrangement with the IMF.
"If it is transformed into a precautionary arrangement, this country will not get such tranches anyway," he said. The issue of the transformation of the arrangement into a precautionary one was discussed during this mission, but it will be officially raised after the review is made, Velchev said.
He said Bulgaria had an effective arrangement with the IMF, which signalled to the rest of the world that the Government was pursuing a prudent fiscal policy supported by the Fund.
The IMF advised the Government against submitting the draft budget to Parliament before revising it, Schiff said. If this draft budget was approved, the budget deficit could exceed 2 per cent instead of the budgeted 0.7 per cent of GDP, he said.
To continue to implement the IMF-Bulgaria standby arrangement, the current review should be formally concluded which, for its part, requires agreement on next year's budget.
Back in Washington, the mission will keep up its active dialogue with the Government on the budget parametres on which agreement has not been reached now, he added.
"I remain optimistic that we will conclude sucessfully this review by the end of the year, so as to make possible the approval of the programme's extension by the IMF Executive Board in January," Velchev said.
Schiff said that the economy was viewed in positive terms on the whole, economic growth was satisfactory, the external situation had improved since the previous mission, inflation in the real economy sector was declining, lending in the banking sector was on the rise, and prospects for the future were good.
No agreement on fiscal policy for 2003 had been reached yet, he added.
He said the sides had exchanged ideas on how to narrow the differences.
"The IMF is ready to return to Bulgaria when necessary," said Schiff.
The IMF mission would continue to hold talks and would try to submit its review report to the IMF Executive Board in January.
Even though January had been set as the deadline, the report could be submitted later if discussions took longer, he said.
For the time being, differences persist regarding the revenues to the National Social Security Institute, the National Health Insurance Fund and VAT.
"The total amount is a little less than 300 million leva but I believe that with the approaching end of the year we will be able to report increase in these revenues as GDP percentage," Velchev said.
The other two negative points are about maintenance costs and the hospital sector subsidies. According to Velchev, the IMF agreed with the cost-cutting policy but would like to see specific reforms next year, leading to a reduction in these expenditures.
Asked whether a smaller revenue side would be budgeted if the IMF rejects the Government's projections on the disputed items, Velchev said that everything possible was being done to avoid this.
He said the draft budget would be passed basically unchanged, except for some possible amendments between first and second reading and amendments that the Government would move if it made a deal with the IMF in the meantime.
"We expect that the budget will be passed in due course.
"However, even if the budget remains the way it has been presented, we are absolutely sure that it will be utilised, otherwise we would not have submitted it to Parliament," Velchev said.
"If we fail to reach an agreement with the IMF for a long time, this would probably affect the foreign debt Euro-bonds," he said. This effect, however, would be negligible and would be offset by the favourable effect of the forthcoming invitation to NATO membership and the fixing of a date for EU accession at the Copenhagen Summit, he said.
The mission was in Sofia for a second review under the two-year, $300-million standby arrangement for Bulgaria.
A memorandum on the Government's economic policy in 2003 was negotiated at a final meeting Tuesday that was attended by other ministers as well.
The Government and the IMF have not yet reached agreement on some of the parameters of the 2003 draft budget. The IMF Mission does not contemplate another visit here in December but would do so if necessary, said IMF Mission leader for Bulgaria Jerald Schiff.
An agreement on the review should be reached by January, but if necessary the talks can last longer than that, Schiff said. In his words, Bulgaria will not get another standby arrangement tranche if the second review is not completed.
Velchev said that the tranches were not the most important goal of the arrangement with the IMF.
"If it is transformed into a precautionary arrangement, this country will not get such tranches anyway," he said. The issue of the transformation of the arrangement into a precautionary one was discussed during this mission, but it will be officially raised after the review is made, Velchev said.
He said Bulgaria had an effective arrangement with the IMF, which signalled to the rest of the world that the Government was pursuing a prudent fiscal policy supported by the Fund.
The IMF advised the Government against submitting the draft budget to Parliament before revising it, Schiff said. If this draft budget was approved, the budget deficit could exceed 2 per cent instead of the budgeted 0.7 per cent of GDP, he said.
To continue to implement the IMF-Bulgaria standby arrangement, the current review should be formally concluded which, for its part, requires agreement on next year's budget.
Back in Washington, the mission will keep up its active dialogue with the Government on the budget parametres on which agreement has not been reached now, he added.
"I remain optimistic that we will conclude sucessfully this review by the end of the year, so as to make possible the approval of the programme's extension by the IMF Executive Board in January," Velchev said.
Schiff said that the economy was viewed in positive terms on the whole, economic growth was satisfactory, the external situation had improved since the previous mission, inflation in the real economy sector was declining, lending in the banking sector was on the rise, and prospects for the future were good.
No agreement on fiscal policy for 2003 had been reached yet, he added.
He said the sides had exchanged ideas on how to narrow the differences.
"The IMF is ready to return to Bulgaria when necessary," said Schiff.
The IMF mission would continue to hold talks and would try to submit its review report to the IMF Executive Board in January.
Even though January had been set as the deadline, the report could be submitted later if discussions took longer, he said.
For the time being, differences persist regarding the revenues to the National Social Security Institute, the National Health Insurance Fund and VAT.
"The total amount is a little less than 300 million leva but I believe that with the approaching end of the year we will be able to report increase in these revenues as GDP percentage," Velchev said.
The other two negative points are about maintenance costs and the hospital sector subsidies. According to Velchev, the IMF agreed with the cost-cutting policy but would like to see specific reforms next year, leading to a reduction in these expenditures.
Asked whether a smaller revenue side would be budgeted if the IMF rejects the Government's projections on the disputed items, Velchev said that everything possible was being done to avoid this.
He said the draft budget would be passed basically unchanged, except for some possible amendments between first and second reading and amendments that the Government would move if it made a deal with the IMF in the meantime.
"We expect that the budget will be passed in due course.
"However, even if the budget remains the way it has been presented, we are absolutely sure that it will be utilised, otherwise we would not have submitted it to Parliament," Velchev said.
"If we fail to reach an agreement with the IMF for a long time, this would probably affect the foreign debt Euro-bonds," he said. This effect, however, would be negligible and would be offset by the favourable effect of the forthcoming invitation to NATO membership and the fixing of a date for EU accession at the Copenhagen Summit, he said.
