Bulgarian Telegraph Agency (BTA), 97-02-11

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

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

11 February, 1997

CONTENTS

[01] POLITICAL FORCES AGREE ON ANTI-CRISIS PROGRAM, ADOPT A JOINT DECLARATION

[02] DECLARATION - (DETAILED SUMMARY)

[03] PRESIDENT STOYANOV REPLY TO IMFíS CAMDESSUS

[04] OFFICERS DISGRUNTLED AT PAY CUTS

[05] BULGARIA IN CRISIS SEVEN YEARS AFTER REFORMS BEGAN

[06] BULGARIAN LEV PLUMMETS TO NEW LOWS

[07] PRESIDENT STOYANOV, PROSECUTOR GENERAL TATARCHEV MEET

[08] PREPARATIONS FOR SECOND BIDDING ROUND IN MASS PRIVATIZATION UNDER WAY

[01] POLITICAL FORCES AGREE ON ANTI-CRISIS PROGRAM, ADOPT A JOINT DECLARATION

The consultations were called after the third major parliamentary group, the opposition Popular Union, declined the mandate to form a government as expected. In such cases, the Constitution provides for the President to appoint a caretaker government to serve until early elections. On February 4 the parliamentary groups agreed that early elections will be held in April. Now it appears that the date is set for the 19th of April. A major result of the consultations so far is that they have brought the parliamentary political forces together on a reform strategy and on declaring a joint responsibility for the future social cost of reforms, a Bulgarian Business Block spokesman said

[02] DECLARATION - (DETAILED SUMMARY)

- a consensus in society on major social and economic issues;

- joint efforts by all political parties and organizations of the civil society and a capacity on their behalf to jointly bear the responsibility for the social cost of reforms;

- an understanding that for the successful implementation of reforms essential are guarantees of civil and ethnic peace, a strict observation of the laws and respect for the rights of all citizens, regardless of their political convictions and affiliations, which will avoid a return to destructive confrontation;

- a conviction that following the Constitution as a basic social contract is the common basis for overcoming the crisis.

The parliamentary forces declare their agreement on the following principles for overcoming the political and economic crisis and in connection with the upcoming early elections:

Political Consensus

- The political forces undertake to normalize political life within the framework of parliamentarism and the democratic process and do their best to promote the authority and efficiency of the State institutions.

- Having in mind that the Constitution defines Bulgaria as a parliamentary republic, the political forces see the National Assembly as the appropriate national forum for seeking responsible and legitimate solutions.

- The political forces will help stabilize local government so that it can tackle in normal conditions the everyday problems of citizens.

- Before the 38th National Assembly is elected, the political forces will use the mechanism of the Consultative Council on National Security for maintaining an constant dialogue and, should need arise, will hold consultations to ensure peace and stability in society and to guarantee the public order and national security.

- The political forces declare their determination to ensure that there will be no violations of the civil rights and liberties of the citizens, regardless of their political convictions, and that no political repressions will occur, which would undermine the consensus on the need for reforms.

Economic Reform

According to the principles of market economy, the political forces stand for: - speedy and transparent privatization; - attracting strategic and foreign investors; - financial stabilization which would guarantee a living minimum for the population at large; - a speedy and well motivated liquidation of money-losing companies; - measures to combat corruption and the shadow economy as well as prosecution in courts of all those who have participated in the plundering of the national assets; - providing incentives for business and for investments ; - restructuring the state-financed sector and cutting down public spending, including by downsizing the number government employees; - a speedy restitution of farm land.

A Final Programme for the National Assembly and Parliamentary Elections

Before its dissolution, the 37-th National Assembly is to adopt:

- the legal framework for the normal and democratic holding of the early parliamentary elections;

- the necessary amendments to the Aggregate Income Tax Act;

- legal measures for urgent assistance to owners and tenants of farm land.

An agreement should be reached on the representation of the political forces in the Central Electoral Commission and local electoral commissions.

The political forces should ensure free, fair and democratic elections, including through the presence of international observers.

[03] PRESIDENT STOYANOV REPLY TO IMFíS CAMDESSUS

"I would like to thank you for your congratulations, for your confidence and the support you extended to me at a crucial moment," President Stoyanov's letter says. "As the latest events show, considerable progress has been made in peacefully settling Bulgaria's political problems and in placing it on the right track for overcoming the deep economic crisis," Mr. Stoyanov says, recalling that the parliamentary forces agreed on the holding of early parliamentary elections and s that a caretaker cabinet would be appointed within days.

"The caretaker cabinet and the Governing Board of the National Bank of Bulgaria, who have assured me of its support, will be ready to receive an IMF high-level mission immediately and open negotiations on the preparations for the introduction of a currency board in Bulgaria. At the same time we would like to consult the IMF mission about measures necessary to achieve financial stabilization during the transition to a currency board," Mr. Stoyanov says.

The President points out that besides technical aid, finding other forms of immediate financial assistance is of paramount importance for Bulgaria. "Without such aid Bulgaria will have enormous difficulties in emerging from the crisis," the Bulgarian President notes.

"I would like to express once more our desire to take all necessary steps for the timely preparation of a new economic programme coordinated with the IMF and the World Bank, as well as for the carrying out of structural reform in the real sector," Mr. Stoyanov says in conclusion.

[04] OFFICERS DISGRUNTLED AT PAY CUTS

Under the Act, officers should draw at least double the average wage in the state-financed sphere. Thus, a commissioned officer's starting average salary was to be 25,000 leva for January. Decreeing a 100 per cent increase of wages in the state-financed sphere as from February 1, however, the outgoing Government gave servicemen only a 60 per cent rise. Press reports suggest that the Government pared military pay lest senior officers become better paid than cabinet ministers and MPs.

Three to four hundred military of the Sofia garrison gathered at the presidency building Monday evening. President Stoyanov expressed readiness to address the protesters in a letter and receive their representatives, the President's press office told the media. The servicemen however were unwilling to elect representatives for such a meeting, saying the protest was not an organised one.

Monday morning the commander of the Bulgarian army, Lieutenant General Kiril Ermenkov invited the protesters to discuss financial and social problems of their families, the Defence Ministry press office told "Daily News". The meeting lasted until noon.

In the afternoon atendees and lecturers of Rakovski National War College the met with Chief of General Staff Totomirov, the press office also said. After the meeting with Totomirov, the officers said they were not happy with his answer, National Television (BNT) said in the evening news. Totomirov expressed understanding; he is also committed to the implementation of the provisions of the Armed Forces Act, one of the officers rallying at the presidency told BNT. "The cabinet decree in essence violates the contract between us and the Ministry of Defence," the officer said.

[05] BULGARIA IN CRISIS SEVEN YEARS AFTER REFORMS BEGAN

When seven years ago the country embarked on the road of reform, nobody here doubted that if it will not outrun the rest of Eastern Europe, it will at least be able to move together with it. Now, however, both incumbents and opposition admit that Bulgaria is the worst laggard, facing yet another price shock and an urgent need to restart the reforms yet again.

Bulgaria is in hyperinflation, economists and politicians claim, even though official statistics claim that hyperinflation has not yet arrived. The official inflation figure for January is 50 per cent, but expert Mika Zaikova of the Podkrepa Labour Confederation fears the actual level was 70 per cent-plus.

Bulgarians have seen their living standards plummet. Even at its new level, 11,000 leva (double the previous amount), the minimum monthly wage is not enough to buy bare necessities. A loaf of bread already retails at over 200 leva and may well reach 1,000 leva, a kilo of sugar reached 1,300 leva, a kilo of white cheese 3,000-4,000 leva, and a kilo of meat 7,000-8,000 leva. Apart from being prohibitively priced, staple foods are often unfindable in shops. Wary of the volatile situation, some retailers would rather not sell at all.

Shelves in many pharmacies, above all the state-owned ones, are empty. People are stocking up heavily on Bulgarian-made medicines. Very few can afford American aspirin, Austrian antibiotics or British head-ache pills. Local hospitals are in a disastrous condition. Most of them require patients to bring their own medicines and dressing. The crisis has also hit vital institutions such as the ambulance service and the Pirogov Emergency Hospital, where essential medical supplies are scarce.

Electricity rates are exorbitant, and another 35 per cent hike will apply as from the end of this week. Petrol is already a luxury item for average Bulgarians. Incidentally, it is out of stock. The largest oil refinery, Neftochim, cut down deliveries because, as the press explained, it found it unprofitable to sell the fuel so cheap. The petrol shortage struck Sofia's urban transport, with buses running at larger intervals for several days now. Petrol is readily available on the black market - at 1 Deutsche mark the litter.

The lev has dived to unprecedented lows by Bulgarian standards, beating all expectations. The national currency has depreciated by a factor of 40 within a year. Foreign-exchange reserves now stand at some 415 million US dollars, which is only half of the 992.2 million dollars falling due this year in payments on Bulgaria's foreign debt. 135.1 million dollars were paid in January, but debt payments at the end of the year will be most difficult to meet.

Many economists see the rampant dollar as the main inflationary factor. For some time now, there has been an idea to fix the exchange rate. This is impossible for the time being, argues central bank Governor Lyubomir Filipov. To fix the rate, this country should receive substantial funding from sources abroad, or else internal resources should be severely restricted and production stabilized.

Bulgaria cannot count on large lump-sum external financing. The Socialist Government, which resigned at the end of December, failed to meet its commitments under the fourth stand-by arrangement with the International Monetary Fund which was thus terminated. After President Peter Stoyanov appoints a caretaker cabinet this week, the Fund is expected to send a mission here. To be competent to sign agreements with the IMF and the World Bank, however, the interim government must be voted express powers by Parliament before its dissolution.

Sofia Mayor Stefan Sofiyanski, who will almost certainly be the caretaker prime minister, singled out negotiations with the international financial institutions as the foremost priority of the interim cabinet.

[06] BULGARIAN LEV PLUMMETS TO NEW LOWS

The present foreign exchange rates put off buyers, said a Post Bank dealer. The absence of both leva and dollar resources may create a false impression of a market balance. The very few speculators who can still be seen on the forex market are buying dollars seeking a safe haven for their capital.

On the cash market dollars were offered at 2,850 leva. The wide cash- interbank market margin is attributable to a chronic shortage of leva resources, said a dealer of the Vi Vesta financial and brokerage house. Foreign exchange offices have drawn as their clients commercial banks and commercial banks' clients.

In January 27 - February 10, the Bulgarian lev lost some 135% against greenbacks. From late December till early February food prices rose by an average of 242%, according to trade union figures. Trade union statisticians say prices started soaring in the last days of January and are most likely to keep going up throughout February.

The vanishing of many foods from the market over the last two weeks is indicative of the speculative nature of hyperinflation, BTA was told by economist Roumiyana Kraleva of the Confederation of Independent Trade Unions. Independent financial experts agree the soaring dollar does not justify the skyrocketing food prices.

Preliminary figures of the official National Statistical Institute set inflation in January at 43.8%. The calculations are based on consumer goods prices in January 5-25 1997.

Only shops selling Bulgarian-made foods stay open while importers are closing down awaiting the introduction of a currency board, BTA was told by representatives of several commercial banks servicing importers. They say commodities whose prices are bound to the US dollar are impossible to sell.

[07] PRESIDENT STOYANOV, PROSECUTOR GENERAL TATARCHEV MEET

The President believes national assets were smuggled out of the country over the past few days whereas I say they were being smuggled all the time the Socialist party was in power, Prosecutor General Ivan Tatarchev told journalists after the meeting. The culprits for this situation whose involvement in crimes can be proven, will be called to account, he said adding there are no legal obstacles to arrest even Zhan Videnov if there is evidence for his guilt.

Tatarchev is expecting a comprehensive report on the grain scandal. He hopes the interior minister in the future caretaker government will take steps to prevent the suspects from leaving the country. He said such measures are fully within the powers of the Interior Ministry and the Penal Code provisions are good enough to make sure the culprits will get what they deserve.

[08] PREPARATIONS FOR SECOND BIDDING ROUND IN MASS PRIVATIZATION UNDER WAY

A total of 47,000 million leva worth of vouchers remained idle after the first round in mass privatization bidding held last October. Bidders bought 41.36% of the offered shares in a total of 968 enterprises with capital totaling 33,000 million leva, the auction authorities said. Shares of 341 enterprises were sold out in the first auction, while shares in 627 companies will be offered in forthcoming ones. Privatization funds bought 35.8% of the total number of shares; individual participants acquired 5.5%.

Shares worth a total of 50,000 million to 52,000 million leva are expected to be offered at the second bidding round when funds and people will bid for 70 new enterprises. At the same time, a dozen enterprises in bad financial condition were striken off the mass privatization list.

Members of the public may choose among 65 privatization funds which received permission to increase their capital from the Securities and Stock Exchanges Committee.

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