- Title: BULGARIA/ UNITED KINGDOM: BULGARIA MOVES TO MEET IMF STABILISATION CRITERIA
- Date: 10th May 1996
- Summary: SOFIA, BULGARIA; LONDON, UNITED KINGDOM (MAY 10+13+14, 1996) (REUTERS TELEVISION - ACCESS ALL) SOFIA, BULGARIA (MAY 10+13) 1. BULGARIAN NATIONAL BANK BUILDING. SOFIA 2. HEAD OF THE BULGARIAN NATIONAL BANK, LUBOMIR PHILIPOV WALKING TOWARDS CAMERA 3. BULGARIAN GOVERNMENT BUILDING WITH BULGARIAN FLAG ON TOP SOFIA, BULGARIA (MAY 14) 4. MEETING BETWEEN MRS ANNE MCGUIRK, IMF OFFICER RESPONSIBLE FOR BULGARIA AND BULGARIAN PRESIDENT ZHELYO ZHELEV PLEVEN, BULGARIA (MAY 14) 5. PLAMA OIL REFINERY. VARIOUS VIEWS BOTEVGRAD, BULGARIA (MAY 14) 6. MICROELECTRONICA FACTORY, VARIOUS VIEWS SOFIA, BULGARIA (MAY 10) 7. AGRICULTURAL BANK WITH WORRIED SAVERS QUEUING TO WITHDRAW DEPOSITS 8. EMIL HARSEV FORMER DEPUTY CHIEF OF BULGARIAN NATIONAL BANK, NOW AN INDEPENDENT FINANCIAL ADVISOR: "IF THE GOVERNMENT AGREES WITH THE PROPOSAL OF THE IMF MISSION, THE JUDGEMENTS ARE THAT AT LEAST 40,000 PEOPLE WILL LOSE IMMEDIATELY THEIR JOBS. THE PANIC CATCHED MOST OF THE POPULATION. DEPOSITORS ARE RUNNING TO WITHDRAW THEIR SAVINGS AND CONVERT THEM TO HARD CURRENCIES. UNFORTUNATELY PEOPLE ARE NOT ABLE TO BELIEVE ANY MORE THE PROMISES OF THE GOVERNMENT AND THE CENTRAL BANK THAT THE BANKS WILL BE STABILISED." (ENGLISH) 9. ILIENTZY MARKET, SOFIA, SHOWING PRICE TAGS IN UNITED STATES (U.S.) DOLLARS INSTEAD OF LEVS 10. SAME LOCATION, EMPTY SHOPS, OTHER PRICE TAGS 11. EXCHANGE BUREAUX SHOWING WIDE SPREAD BETWEEN BUY AND SELL 12. NEWSPAPER STALL, CLOSE-UP HEADLINE "108%" 13. UNIDENTIFIED WOMAN SAYING "I THINK THAT THE BULGARIAN SOCIALIST GOVERNMENT IS RESPONSIBLE." (ENGLISH) 14. UNIDENTIFIED MAN SAYING "AS LONG AS THE COMMUNISTS STAY IN POWER, OR RATHER IN OFFICE - IT SEEMS TO BE IN OFFICE BUT NOT IN POWER THERE WILL BE NO IMPROVEMENT OF THE CRISIS." (ENGLISH) 15. UNIDENTIFIED WOMAN SAYING "IN MY OPINION THE RESPONSIBILITY FOR ALL THE SITUATION IN BULGARIA, FOR THE ECONOMIC AND CRISIS NOW IS ON THE SOCIALIST GOVERNMENT." (ENGLISH) LONDON, ENGLAND (MAY 14) 16. PARVOLETA SHTEREVA, EAST EUROPEAN ANALYST, BARINGS ING BANK, LONDON: "THOSE MEASURES THAT THEY ARE TAKING NOW ARE VERY LONG OVERDUE, 5 OR 6 YEARS OVERDUE AND IT'S CLEAR THAT THE ECONOMY CANNOT TAKE ANY MORE WITHOUT GOING THROUGH PAINFUL REFORMS SO THERE IS ALSO A LOT OF PRESSURE FROM CIRCUMSTANCES AND A LOT OF POLITICAL PRESSURE INTERNALLY BECAUSE OF THE COLLAPSE IN THE NATIONAL CURRENCY." (ENGLISH) SOFIA, BULGARIA 17. BENNETON STORE CLOSED 18. BOY ON STREET PAVEMENT COUNTING LOCAL CURRENCY 19. TRAM TRAVELLING TOWARDS CAMERA Initials Script is copyright Reuters Limited. All rights reserved.
- Embargoed: 25th May 1996 13:00
- Keywords:
- Location: SOFIA, BULGARIA; LONDON, UNITED KINGDOM
- City:
- Country: Bulgaria
- Reuters ID: LVABNGLIIE5M9IKZLEL7PQCRPUCT
- Story Text: INTRO: Bulgaria's Central Bank, the Bulgarian National Bank (BNB) has said it will start bankruptcy proceedings against four of the country's banks once parliament approves a deposit guarantee law. This would be the first major move by Bulgaria to meet strict stabilisation criteria laid down by the International Monetary Fund (IMF). An IMF delgation and a delegation from the World Bank are both in Sofia this week.
The Bulgarian Parliament insisted the government put a law in place to guarantee depositors funds before it would allow the government to close indebted banks. That law is expected to be approved on Tuesday (May 21).
Amid fears of a banking crisis, the BNB has already been forced to raise interest rates to 108 per cent (correct) to support the currency, the Lev.
Reserve requirements for banks were also raised from 8.5 to 10 per cent of deposits.
Confidence in the banking system was damaged by the Government's announcement of the restructuring and stabilisation plan proposed by the IMF delegation, working under the IMF officer for Bulgaria, Mrs Anne McGuirk. The plan proposed closure of at least 67 state-owned enterprises which owe a total of 200 billion Levs ($1.8 billion) to the banks - with little if any prospect of those companies being able to repay the loans. Another 40 companies will face major restructuring.
Among the companies earmarked for closure are the Plama oil refinery at Pleven - a relic of communist state-controlled industrial development which was unable to survive in a more open economy.
But other companies which have been told they are to close say they should be sold as going concerns.
The Microelectronica plant in Botevgrad lost 155 million Lev ($1.2 million) and is number 16 on the closure list. But management and the 672 workers there say their modern plant should be kept open.
The company has used no loans since 1993, and says it has real markets and future prospects for the assembly of hybrid microchips.
After the publication of the closure list, the Government said nine of the country's 47 banks were "in a difficult financial position".
Investors queued to withdraw deposits from banks named by the government as being at risk. Last week two banks, the Bank for Agricultural Credit and the Agrobusinessbank, were taken over by the Bulgarian National Bank to prevent their immediate collapse.
The Lev plunged from 79.80 Levs to the US Dollar on April 15, to 125 Levs to the Dollar on May 21.
Emil Harsev, the former Chief of the BNB, now an independent financial advisor, said the Government's proposals would lead to the loss of 40,000 jobs. He said that during the crisis people were not able to believe the Government promises that the banks would be stabilised.
Since the crisis began, shops and markets have been almost deserted, as shopkeepers raised prices.
In Bureaux de Change, owners responded to the crisis by widening the spreads between buy and sell prices on hard currencies against the Lev.
Public feeling against the Socialist Government's handling of the crisis is running high.
One woman said the Bulgarian Socialist Government was responsible for the current crisis.
Another man blamed the communists.
Parvoleta Shtereva, East European Analyst at Barings ING Bank in London said the measures being taken by the government in Sofia were long overdue.
The IMF team is continuing its negotiations with the Bulgarian Government. Until those negotiations are complete and depositors in the country's banks can be assured of their savings, it is unlikely that economic and business life in Sofia will return to normal.
(Exchange Rate, 21 May 1996: 125 Lev = 1 US Dollar)
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