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Bulgaria must increase exports

Date: 04.12.2005

Velichka Rangelova
Doctor of Economics

In its reports, the EU keeps criticizing Bulgaria for insufficient loans provided to small and medium-size businesses. At the same time, the IMF frowns on our banking system for giving out loans too lavishly. The Bulgarian National Bank (BNB) lends an attentive ear to the IMF and continually imposes restrictions in order to reduce bank loans. Although IMF experts maintain that Bulgaria shouldn't be a spendthrift and must have a budget surplus, this is not true to the actual economic realities in Bulgaria. Such claims run contrary to what world economic analysts say.

Bulgaria's exports demonstrate a stable upward tendency and - because the country has to buy raw materials and equipment abroad - it is only natural that imports are on the increase. In the nine months of the current year, Bulgaria's exports are worth 13,3 billion levs (1 euro = 1.96 leva), whereas import's worth runs at 20,3 billion. Exports' growth (set against the same period of 2004) accounts for 17,3 percent compared with 26.7-percent growth in imports. The negative foreign trade balance in the first three trimesters of 2005 amounts to 7 billion levs. If the trend persists till end-year, the foreign trade deficit will be about 7,3 billion levs. Import from Russia - predominantly fuels - has grown by 1,4 billion levs within last nine months, compared with 1,4-billion increase in imports from the EU.

Equipment, machines, transport vehicles constitute the lion's share of import (6,1 billion levs), while the imported fuels and lubricants account for 4 billion. Slight growth was observed in imported foodstuffs, while the import of soft drinks has shrunk.

With this in view, the claims of the IMF that reducing consumption Bulgaria could improve its foreign trade balance are not economically grounded. On the contrary - it is the import of goods that are invested in production sphere, which boosts Bulgaria's import. What the country needs is to stimulate exports. The reasons for negative current-account balance are different. The most powerful factor that will continue to aggravate this tendency in the future is the currency board.

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