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Raiffeisen Economist: Bulgaria Discusses Bailout Aid with IMF

Date: 08.06.2009

Bulgaria isinformal discussions with the International Monetary Fund over the growing negative effects of the global financial crisis.

The announcement was made by Raiffeisen Centrobank SA Chief Economist, Peter Brezinschek, reported.

The Bulgarian government that emerges after July 5 elections will seek an international bailout to repay the country's short-term debt, he said.

"There are informal discussions with the IMF... This is not official yet, they haven't reached a conclusion. After the elections, a new government will be in power and we'll have an official announcement that Bulgaria will get assistance from the IMF in conjunction with the European Union...

The country will have the majority of the short-term refinancing needs met by the financial aid from the IMF. The development for Bulgaria principally depends on the new government, how the new government will create an environment for foreign direct investors to invest.

The country must divert foreign direct investment flows into more industries that support exports to achieve more a sustainable expansion. If they can manage that, and maintain the currency board until this change in the industrial structure takes place, I would feel confident. Otherwise they have to give it up because it's too confident", Brezinschek said in a June 26 interview in New York.

Bulgaria, like Latvia and Belarus, lacks sufficient reserves to cover debt coming due this year and may have to tap "official sources" for more capital, the World Bank said on June 22.

Gross foreign debt is equivalent to 107 percent of the economy and foreign reserves slumped 16 percent in the second half of last year. The budget surplus fell 83 percent in the first four months to BGN 352 M (USD 249 M) and may be wiped out by the end of 2009.

The government and the central bank have rejected calls for an international bailout similar to those received by fellow EU states Hungary, Latvia and Romania and by Belarus, Serbia and Ukraine outside the bloc. Bulgarian officials maintain the currency peg is backed by central bank reserves of USD 16 B.

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