Bulgarian Telegraph Agency (BTA), 97-01-08

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From: Embassy of Bulgaria <bulgaria@access1.digex.net>

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

8 January, 1997

CONTENTS

[01] PRESIDENT ZHELEV TO ATTEND FORUM HONOURING MITTERRAND

[02] RULING LEFT CONFIDENT OF SUCCESS IN FORMING NEW CABINET. OPPOSITION CONTINUES STREET PRESSURE

[03] WORK ON INTRODUCTION OF CURRENCY BOARD UNDER WAY

[04] RED CROSS CHARITY

[05] LEV DEPRECIATES 600% IN 1996

[06] 100TH ANNIVERSARY OF PATRIARCH OF BULGARIAN PHYSICS GEORGI NADJAKOV

[07] OPPOSITION'S PROTESTS CONTINUE

[01] PRESIDENT ZHELEV TO ATTEND FORUM HONOURING MITTERRAND

President Zhelev will take part in one of the sessions and will share his impressions of Mitterrand, Karcheva said. The two met about a dozen times in nearly eight years following the late French President's meeting with Bulgarian dissident intellectuals, including Zhelev, in 1989, Karcheva also said. On his second day in Paris Zhelev will give a lecture on "Bulgaria's Problems and the Transition Period" at the International Institute of Public Administration. Mr. Zhelev's five-year term expires later this month and he will be replaced by President elect Peter Stoyanov.

[02] RULING LEFT CONFIDENT OF SUCCESS IN FORMING NEW CABINET. OPPOSITION CONTINUES STREET PRESSURE

The fact that the BSP chose an outgoing interior minister for its prime minister shows that it is looking for a man capable of coping with mass protests rather than with the economic crisis, opposition Union of Democratic Forces (UDF) leader Ivan Kostov said on Tuesday. This is not a normal choice, Kostov said at a news conference, because he does not have the necessary economic training, international contacts and international prestige. Moreover, Dobrev has shown his inability to cope with his duties as interior minister, leaving many serious crimes uncleared and failing to deal with corruption in power, the UDF leader said.

Regardless of Nikolai Dobrev's merits, his possible nomination as prime minister is a compromise choice for the BSP and his task will be extremely difficult, Bulgarian Business Bloc (BBB) spokesperson Hristo Ivanov said on Tuesday. He also announced the firm decision of the BBB against participation in a new cabinet of the Left. The BBB is the smallest parliamentary force which has so far voted most often in support of the Democratic Left in Parliament.

According to Ivan Kostov, there are indications of the inability of the BSP to form a new cabinet. There is infighting in the BSP between two groupings - that around former BSP leader and outgoing prime minister Zhan Videnov, Democratic Left floor leader Krassimir Premyanov and that around the new Socialist leader - Georgi Purvanov (elected at the extraordinary congress of the BSP on December 21, 22 and 23 last year), Kostov claims. The two groupings are competing for control over the executive, Kostov believes.

At its session on Tuesday the Executive Bureau (EB, the top leadership) of the Supreme Council of the BSP discussed the main principles of the new left government. "We proceeded from the understanding that the future cabinet will declare its categorical will to implement the reform, to steer this country through the most difficult period of the economic reform and to complete its term successfully, said EB member Miroslav Popov. The cabinet can achieve this goal only in the conditions of civil and social peace and its achievement will be another important task of the new cabinet. "The second left government will make a careful, concrete and critical review of all mistakes, weaknesses and failures of the previous government over the past two years. It will not seek to establish itself as some kind of counterpoint to its predecessor but to achieve the necessary continuity," Miroslav Popov also said.

At the session the top leadership of the BSP analyzed the actions of the opposition. The conduct of the political elite of the UDF is becoming ever more undemocratic and their statements are characteristic not of a democratic but of a rightist, authoritarian, dictatorial and anti- democratic political force," Valentin Vatsev of the EB of the BSP told the press. "They are resorting to a political style of a Pinochet type," Vatsev claims. By way of illustration he cited a statement by Ivan Kostov who said that it is necessary to use the arguments of force in communicating with the Socialists. The Socialists fear that the protests of the opposition last week in front of the BSP headquarters may be sign of the emergence of a violent tendency which may acquire proportions threatening civil peace.

While the left-wing is forming its new cabinet, the opposition still believes that Parliament may support its Declaration on National Salvation at its extraordinary sitting scheduled for January 10. The Declaration insists on the election of a new board of governors of the central bank, on forming a group to conduct negotiations with the international financial institutions, on the dissolution of Parliament and the holding of early parliamentary elections. "It is only natural to expect that the Declaration will be supported by MPs of the BSP upholding the interests of the state," Kostov said on Tuesday. Until then the united opposition will continue to head protest rallies and marches in support of the Declaration for National Salvation and early parliamentary elections and against a second cabinet of the BSP. Such rallies will be held in Sofia on January 8, 9, 10. Then the opposition will decide on its future conduct depending on Parliament's decision on the declaration of the opposition. "No matter what happens, one thing is clear - a second cabinet of the BSP will be a cabinet of national misfortune," Ivan Kostov said.

[03] WORK ON INTRODUCTION OF CURRENCY BOARD UNDER WAY

The proposal for an introduction of a currency board in this country was made by the International Monetary Fund (IMF) in early November last year. The measure was described as an extreme but only option for Bulgaria's way out of the grave economic and financial crisis. An IMF mission visited Bulgaria in last December to specify the technical conditions for the introduction of a currency board. Initially scheduled for early January 1997, the arrival of the next IMF mission was postponed, after the Zhan Videnov cabinet resigned in late December. The Videnov cabinet accepted the IMF proposal to place a currency board in Bulgaria.

Ongoing discussions focus on the possible ways to introduce the principles of a currency board, and not on the establishment of the institution "currency board" with its own administration, Kostov said. According to him, what this means is observing agreed rules about the activities of the National Bank of Bulgaria (BNB, the central bank) and not setting up a new central bank. The cabinet will propose amendments to the National Bank of Bulgaria Act which envisage the institution's organizational restructuring and reduction of the existing management and supervisory tiers. The bill also includes texts ensuring the legal introduction of the currency board.

Setting up of a foreign debt management agency is a must for the introduction of the currency board, Kostov said. So far, this has been one of the functions of the central bank, he said. Drafting the necessary legislation is not the sole precondition for the introduction of the currency board, Kostov stressed. He said that the structural reform, cash and mass privatization need to be accelerated and that losses in the real economy have to be contained, together with exercising daily control on the liquidation process.

No changes in this country's foreign currency regulations will be needed for the introduction of a currency board; what is more, certain liberalization in this respect would be possible some time following the introduction of the measure, Kostov said. According to him, the currency board would not necessitate elimination of this country's internal debt but only containing its growth. The internal debt now stands at between 600,000 million leva to 800,000 million leva, he said.

Introducing the currency board in late February is a feasible option, Kostov said. The finance minister said that it is yet unclear to what currency the lev will be pegged and at what exchange rate. Once the board is put in place, Bulgaria will be able to sign financial aid agreements with the World Bank amounting to USD 150 million - USD 200 million, with G- 7 countries, amounting to USD 100 million - USD 200 million and with the European Union, Kostov said.

[04] RED CROSS CHARITY

The Bulgarian Red Cross distributed part of the funds received through an appeal by the International League of Red Cross and Red Crescent Societies among its regional organizations supporting soup kitchens. Nineteen soup kitchens have been set up with funds raised through this initiative. Their operating expenses in January total 9,450,000 leva. The Charity Fund raised 360,700 leva during a Christmas campaign mottoed "Nobody's children are our children". The money was spent on clothes for orphans and old people living in retirement homes. Over 600 people donated clothes, toys and books worth 700,000 leva.

[05] LEV DEPRECIATES 600% IN 1996

In the first two months of 1996 alone the national currency depreciated by 8%, which equals the annual depreciation for 1995. Players on the foreign currency market warned against a new foreign currency crisis (after the lev plunged from 54 leva/USD 1 to about 70 leva/USD 1 in late 1995), which could get worse unless Bulgaria receives funds from external sources. The National Bank of Bulgaria (BNB, the central bank) played an active role on the market, trying to support the lev at about 70 leva/USD 1, against the target of 80 leva/USD 1 in the 1996 budget framework. The steep appreciation of the US dollar, began already in late February. The efforts of the central bank to keep the dollar down found expression either in intensive interventions in the forex market or in gradual but steady increase in the base interest rate. Thus in early May the base interest rate reached the then record high level of 108% (having passed through 42%, 49% and 67%).

In June the exchange rate of the US dollar fluctuated around 140-150 leva. In the first half of July the dollar vaulted once again reaching 190 leva/USD 1. This was brought about by the restricted participation of the central bank in the market and was followed by a brief stabilization of the forex market after Bulgaria signed its fourth stand-by agreement with the International Monetary Fund (IMF) for USD 540 million. The restraining effect the first, USD 100 million tranche, had on the forex market was brief as the money was used for foreign debt payments.

The dollar crossed the 200 leva mark in early September when the BNB withdrew from the forex market. It was pushed further up by a surplus of leva resources after maturity of deposits placed with branches of the State Savings Bank across the country. Throughout the rest of the month, greenbacks continued to appreciate gradually fetching 300 leva- plus under the impact of the depleted foreign exchange reserves and the delayed floating of the second tranche under Bulgaria's lending agreement with the IMF. On September 23 the BNB took the desperate decision to hike the base interest rate from 108% to 300%.

In the first days of October with the 300% base rate the dollar dropped to 250 leva. Dealers and financiers warned there is an inflationary leva supply that could push the dollar steeply up to much over 250 leva. Then the base rate was reduced to 240% and the dollar started going smoothly up to 260-270 leva Ó”Ë 1 USD.

Till the first days of November the fluctuations of the US dollar was controlled by the BNB and it dropped to 240 leva to start up again after the central bank decided to reduce the base rate further from 240% to 180%. The exchange rate of the US dollar started appreciating by 7-8 leva each day fetching 266-269.80 leva/USD 1 in mid-November for which dealers saw no obvious reason. Panicking over rumours of liquidity problems facing the State Savings Bank, depositors started withdrawing their savings to convert them into hard currency thus pushing the US dollar up by 20-40 leva a day to 400 leva around November 25. In the meantime, during a visit to this country in early November IMF officials proposed a currency board as the only way to rehabilitate the financial system and economy of Bulgaria.

In early December the forex market settled and the US dollar dropped awaiting the response of the BNB. The central bank, however, remained inactive and helpless to counter the vault of the US currency. At the end of the first week of December the dollar soared to 455 leva. The headlong plunge of the lev continued throughout the second week of December when the dollar strode across the 550 leva mark. Financial and government institutions remained equally indifferent to the behaviour of the domestic currency and then prime minister Zhan Videnov and BNB Governor Lyubomir Filipov sent a letter to the IMF confirming Bulgaria agrees to introduce the currency board mechanism. In the third week of December the lev recovered slightly and several days before Christmas the exchange rate on the interbank market was 410-420 leva/USD 1. However, an upward trend of greenbacks prevailed till the end of the year and on the last work day of 1996 the interbank forex market closed at 507-510 leva/USD 1.

At a news conference on December 29, 1996 Lyubomir Filipov said in January BNB will concentrate its efforts on this country's foreign debt payments and will make limited interventions on the forex market to prop up the lev. As a result trading opened at 575-585 leva/USD 1 on the first working day and closed at 695-698 leva/USD 1 on the second. The lev depreciated by 37 percent within two days. The US dollar cleared the 700 leva mark and then fell to 665-675 leva on January 6 and 640-645 leva on January 7. Meanwhile the central bank announced that the exchange rate will be set according to new methods.

[06] 100TH ANNIVERSARY OF PATRIARCH OF BULGARIAN PHYSICS GEORGI NADJAKOV

In 1937 Georgi Nadjakov made his significant discovery, the photo- electret state of matter, which he explained both theoretically and experimentally. It is used in certain types of memory-storing devices and the technology for photocopying. It is well known that the photos of Mars taken by the Mariner satellite were directly transmitted to the Earth using photo- electrets.

Academician Nadjakov's discovery was a great success not only for the Bulgarian but also for the world science. Scholars from the Untied States, India, Brazil, Japan, etc. have used it for further research in the area. Academician Nadjakov founded the Institute of Physics with the National Academy of Sciences in 1946 and was its director till 1971. He was one of the founders of Pugwash movement and was an honorary chairman of the World Peace Council.

[07] OPPOSITION'S PROTESTS CONTINUE

The united opposition (the Union of Democratic Forces, the Popular Union coalition and the ethnic Turks' Movement for Rights and Freedoms) launched a series of protests against the ruling Bulgarian Socialist Party on January 3 in Sofia. The protests, which will continue by January 10, come to back a draft declaration on national salvation moved in Parliament by the opposition. The draft declaration was discussed by the MPs but they could not vote it over time shortage. In the declaration the opposition pledges for the appointment of a new Governing Board of the National Bank of Bulgaria to hold negotiations with the International Monetary Fund on the introduction of a currency board in the country, for the formation of a team to work out with the World Bank a program for structural reform, for immediate disbanding of the Parliament and for early parliamentary elections.

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