p Anualreports 1990 En

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BULGARIAN

NATIONAL BANK

Abbre$iations


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(onourable C'airmans'ip of t'e GrandNational Assembl)(onourable Members of Parliament)

In accordance with the Constitution of Bulgaria, Art.29, Par.2, which statesthat the Bulgarian National Bank is accountable to the National Assembly, allowme, in my caacity as !o"ernor of the Bank, to resent to #our attention the BNB$sannual reort for %99&.% beg you to remember that the former management of the

BNB that you discharged by "ote in 'anuary %99% had to work and take decisionsin a state of erfect deendence on the !o"ernment and the ruling arty.

In %99& the situation in the country was characteri(ed by aggra"atingeconomic and olitical crisis. Industrial outut and the !ross National Productcontracted abrutly. Inflation accelerated. )he !o"ernment announced amoratorium on the e*ternal debt ayments because of the enormous e*ternal debtand the e*haustion of foreign reser"es. +oreign trade was reduced in bothdirections. A disintegration of the re"ious relations with the C-A countries wasin rocess. )he country suffered economic damages due to the Persian !ulf ar,too.

/nder those difficult circumstances, the BNB management started to reformthe banking system on a narrow scale, by reducing the e*cess credits and ad0ustingthe foreign e*change olicy. At the same time it worked hard on rearing the

Bulgaria$s admittance to the International onetary +und and the orld Bankmembershi.

In %99& the BNB continued the reform initiated in %91, intended to establisha two3tier banking system. )he Bank was released from its former irrele"antcommercial bank obligations and began to work on its functions of a central bank.)he in"estment banks established se"eral years ago, seciali(ed by industrialbranches, were turned into uni"ersal banks. )he state monooly o"er banking wasabolished and the first ri"ate banks aeared. Pursuing that basically correct -although slowly and indecisi"ely imlemented olicy, in %99& the BNB$s branch3

offices around the country were transformed into too many indeendent commer3cial banks most of them small and financially weak, which we consider to ha"ebeen an erroneous ste. )hat will enforce in %99%, in line with the Program

submitted by the orld Bank, large3scale mergers to turn them into branch3off icesof a few big commercial banks with consolidated balance sheets. 4n this safer

ground the ri"ati(ation of a art of the banking system can take lace.

In keeing with the old3dated ractices, the BNB continued to concentratethe free credit resources in its hands and to use them for budget

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deficit financing, the only difference being now that it was e*ecuted under thesuer"ision of the !rand National Assembly.

)he foreign e*change olicy was too "olatile and in some asects e"enerroneous. )he decisions were taken outside the Bulgarian National Bank. )he

foreign reser"es were still treasured and managed by the Bulgarian +oreign )radeBank and in %99& were nearly e*hausted. In arch %99& the country aeared

ractically without any reser"es and the !o"ernment had no choice but toannounce a moratorium o"er the reayment of the debt. )he access of the countryand the commercial banks to the international money and caital markets was cutoff. In the course of more than a year our economy has been working "irtually withno net inflow of financial resources from abroad 5with the e*cetion of the modestamount of the first tranche on the International onetary +und$s stand3by credit,disbursed in arch %99%6. 7e"eral ad0ustments were carried out in the field ofe*change rates but the "icious ractice to suort a multilicity of e*change rateswas not abandoned.

)here were no serious changes in the issue olicy. oney 5 l 6 grew u by8" .1 billion, and money in circulation itself increased by 8" %. billion. )hat was

related to the rise in rices and should not be considered as the ma0or source ofinflation. )he rearation of issuing new notes of larger denominations was underway. )he re"ious state symbols were abandoned but new symbols were notconsidered as the !rand National Assembly had not aro"ed the new nationalemblem.

After Bulgaria was admitted as a member of the two biggest internationalmonetary andfinancial organi(ations, the BNBarticiated in the drawing u of the

stabili(ation rogram and the 8etter of Intent. )he International onetary +undaro"ed those documents and allowed the commitment of the first stand3by creditto Bulgaria.

)o sum it u, in %99& the BNB made attemts to influence some negati"e

economic rocesses and to de"elo further the banking system reform but its olicyfailed to be sufficiently owerful and consistent.

7ince the mid3'anuary %99% the BNB has had a new management elected bythe !rand National Assembly. Its acti"ities will not be treated in this reort. But it

should be noted that in the ast four months the BNB has continued its olicy ofcredit restrictions, changed some of its methods and instruments, and raised thebase interest rate in order to achie"e an anti3inflationary effect. Budget deficit

financing is susended for the time being e*cluding the loans granted to the :7tate7ocial 7ecurity +und; to ay off ensions. 7ignificant changes in the foreigne*change olicy are marked by the introduction of a single e*change rate and thecreation of an interbank foreign e*change market. A ortion of the I+ loan has

been used to relenish the foreign reser"es. )ogether with some ministrydeartments the BNB seeks a satisfactory solution to the roblem of the e*cessindebtedness of the enterrises which under the current high le"el of interest rateshamers their economic erformance. )he co3oeration with the International

onetary +und and the orld Bank is going on. )he stabili(ation rogramindicators ha"e been re"iewed and ad0usted with the hel of the +und$sreresentati"es. )he rogram for economic reconstruction including the banking

system reform is nearly accomlished with the assistance of the orld Bank. )heBNB articiates in the settlement of the relations with our e*ternal creditors butthe hardest efforts in this field

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are made by the Commission for -*ternal


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B"ARD "F MANAGEMEN.

.R"/ 0ana 1alutc'e$a

0 G"3ERN"R Ganc'o 1ole$ DEP2.0 G"3ERN"R E4EC2.!3E MANAGER Emil (urse$ DEP2.0 G"3ERN"R Mileti Mladeno$

.AR!A. Roumana 2#uno$a F"RE!GN E4C(ANGE "PERA.!"N% DEPAR.MEN. %toan%'ukero$

EC"N"M!C AND M"NE.AR0 RE%EARC( DEPAR.MEN.Georgi Petko$

BULAR!AN NAT!ONAL BAN"#ANAE#ENT

From 5an, 6 to Dec, *67 6889 From 5an, 6:7 6886;

G"3ERN"R

!$an Dragne$ski Prof, Dr, .odor 3ulc'e$

DEP2.0 G"3ERN"R

(EAD% "F DEPAR.MEN.%

Dimitar Ananie$ Dimitar Ananie$

Georgi Petko$ Georgi Petko$

Atanas Atanaso$7 P',D, Atanas Atanaso$7 P',D,

;.'e ne& managers &ere appointed at different moments of time after 5anuar 6:7 6886,

Documents

p Anualreports 1990 En