THE World Bank (WB) has decided to lend less money, but more institutional support, to Bulgaria to assist the country’s accession to the European Union.

This was announced in Washington on September 25 on the second day of the annual meeting of the WB and the International Monetary Fund (IMF), which was attended by Finance Minister Plamen Oresharski, Bulgarian National Bank (BNB) governor Ivan Iskrov, deputy finance ministers Kiril Ananiev and Dimitar Ivanovski, and BNB deputy governor Dimitar Kostov.

According to Anand Seth, WB director for Bulgaria, Croatia and Romania, the Bank’s experts hac concluded that Bulgaria was receiving sufficient foreign capital, especially from the EU. Bulgaria therefore did not need additional financial support. However, they held that Bulgaria needed more assistance in the use of funds. This was because most money went to municipal governments, which in most cases lacked experience in investment policy. It was in this area that the World Bank could assist, Seth told Oresharski.

The change in the World Bank’s approach will not have an impact on the implementation of the so-called Programmatic Adjustment Loans (PAL).

These loans are the Bank’s main tool for extending financial aid to Bulgaria and supporting the government’s medium-term reform agenda.

PAL3, which is aimed at boosting economic growth, the reduction of poverty, and the reduction of unemployment, is currently awaiting approval by Parliament.

PAL4, which will assist the private sector on behalf of the state, is yet to be agreed.

A delegation of the WB is expected to arrive in Sofia in the first half of October to present a report on the implementation of the Bank’s programmes in Bulgaria in the past five years.

In another development during the meeting, the IMF has asked Bulgaria to write off $105.5 million in debts owed by various Third World countries.

The IMF backed the G8 decision made in June this year to write off $40 billion in debt from these countries. The IMF has formally approved the move and a decision by the WB is expected.

For the past few years, the IMF and the WB have called on Bulgaria to cut back on its claims on money owed to it by the world’s seven poorest countries.

The $105.5 million debt owed by these countries to Bulgaria accounts for five per cent of all foreign debt to Bulgaria, which totals $2.2 billion.

Financial analysts said that that it was not the size of the debt to the poorest countries that was of concern to Bulgaria, but rather that this country wants equivalent treatment of some of the debt that it owes to other states.

Further discussion on the issue is expected soon.

In its latest report on the world economy, published on September 21, the IMF set out its forecasts for growth in consumer prices and current account deficits in Bulgaria and Romania for 2005 and 2006.

“Large current account deficits continue to present a risk to the outlook in both countries, but financing is strong (largely comprising foreign direct investment (FDI) and EU transfers), while in Romania inflation remains close to 10 per cent and needs to be reduced further,” the IMF said.

The IMF said that against this background, it was important that the Government should maintain strict fiscal policy, take further steps to slow credit growth, and push ahead with structural reforms to improve the investment climate, encourage FDI inflows, and raise productivity.

The IMF forecast 5.5 per cent growth for Bulgaria in 2005 and 2006. Inflation in Bulgaria is expected to reach 4.4 per cent in 2005 and 3.5 per cent next year, the IMF said.