Menda Stoyanova, Chair of the Parliamentary Budget and Finance Committee: IMF recommendations are not compulsory

Lily Mircheva

Mrs Stoyanova, how would you comment on the suggestion of IMF experts which recommended that Bulgaria almost double the budget deficit set in the State Budget Law?
- I think the media reported incorrectly that the IMF has given us permission or authorisation for the budget deficit not to be set at 0.7% of GDP, as stipulated in the law, but for it to reach up to 1.8% of GDP. This is definitely not true. We do not have an agreement with the IMF and therefore the opinion of the fund is not compulsory for us. The current situation is quite different from the one in previous years when there was an agreement between the IMF and Bulgaria, and fund experts came to inspect whether we observed it. The IMF was invited by our Government in  order to make an assessment which we might take under consideration.
In principle, the IMF did not say that the deficit should stand at 1.8% of GDP but that we must control this deficit, spending as much public funding as the revenues we collect. If the deficit exceeds 1.8%, this could threaten the stability of the currency board and the finances of Bulgaria. I am personally satisfied with the assessment which the IMF gave us, and, once again, it became clear that Bulgaria is one of the most stable countries in Europe in terms of financial stability and discipline. This is very important for us regarding our ambitions to apply for accession to the exchange rate mechanism and, eventually, for the adoption of the Euro in the next 2 or 3 years.

Will you comply with the rest of IMF’s recommendation to freeze wages and pensions?
- This recommendation was also not stated exactly in this way. The idea is for public spending to be controlled more strictly, and for salaries in the public sector (municipalities, other budgetary institutions) to have the largest relative share in this item, as well as pensions which are the main expenditure item in the budget. Given the slow pace of revenue collection, which is a fact now, this means that we must limit or suspend these payments until we have enough resources for them.

The IMF recently recommended that the Government should take measures to encourage export-oriented branches of the economy. What can be done in this respect?
- Bulgaria’s economy is open and we know that in order to start growing again, exports should first of all return to the 2007-2008 levels. However, exports are very limited now due to the global crisis. The State neither opens new working positions, nor signs contracts, but it is ensuring the necessary conditions, and we should not forget that Bulgaria is one of the few countries which has not resorted to an increase in taxes. This has a direct influence on the prices of our products. The second condition is the financial stability of the State which guarantees the interest of foreign investors.

Which legislative amendments will the parliamentary Budget Committee be working on in the near future?
- With my colleagues, we are currently working actively with experts from the Finance Ministry on amendments to the package of laws concerning the internal auditing system. These are the National Audit Office Act, the Internal Financial Audit Act, the Independent Financial Audit Act, the State Financial Inspection Act, and finally – the Financial Management Act. We are working to amend this package of laws in order to improve the system and eliminate the overlapping functions with a view to make work more efficient. The idea is that controlling authorities will act in a preventive manner with respect to the implementation of projects and orders; they will identify corrupt practices and violations, and promptly eliminate these. These laws concern mainly public funds spent via the national budget and not only European funds.

Why does the recent forecast of the Vienna Institute for International Economic Studies that Bulgaria will register 0% GDP growth in 2010 differ from the Government-projected 0.2% growth of GDP?
- There are various predictions but you see that the IMF improved its forecast in this respect and you know it is one of the most conservative institutions in this respect. I believe there will be minimum growth in 2010 and forecasts change all the time since the environment itself is extremely dynamic. I would like to point out something which is often forgotten – the economy could register growth in 2010 but it will probably be due mainly to the increase in exports, as suggested by the indicators in Q4 2009, but this will not result in higher revenues from taxes. No VAT is charged on exports and, in this sense, economic recovery and the increase in revenues will be delayed in time. We could witness growth in revenues in 2011 as a result of economic recovery. This means that we should keep on tightening our belts.