18.11.2011

The government debt management policy in 2012 will be oriented towards providing the resources needed for budget financing and refinancing at the lowest possible cost by focusing mainly on a stable debt structure and a reasonable level of risk. The upgraded investment rating of the country and the stable macroeconomic and financial policy secure its possibilities for free market-oriented financing both on the domestic and on the international capital markets.

The maximum amount of government debt targeted in Republic of Bulgaria\'s Government Debt Act for 2012 is BGN 15,300 million, of which BGN 4,200 million new debt. Just for comparison, the maximum amount of government debt set in Republic of Bulgaria\'s Government Debt Act for 2011 is BGN 14,600 million, of which BGN 3,900 million is the maximum admissible amount of new debt. The government debt/GDP ratio under Republic of Bulgaria\'s Government Debt Act for 2011 is 19.06%, while it is expected not to exceed 16% at the end of the budgetary year. The maximum figure targeted for the end of 2012 is 18.7%.

A positive net domestic financing is expected in 2012 under the central budget under GS operations to the amount of BGN 484.3 million resulting from issuing GS at par of around BGN 1,220 million and domestic debt repayment of BGN 735.1 million. There is a possibility envisaged for 2012 as well to issue GS at par of around BGN 1 billion on the international capital markets, where needed, which would recover the confidence of global investors along with budget financing.

Government debt structure by indicators in terms of expected performance for 2011 and under the State Budget of the Republic of Bulgaria Act for 2012 is as follows:

Net external financing under the central budget for 2012 is expected to be positive to the amount of EUR 1.2 billion. The absorption of funds under effective and forthcoming credit agreements with international financial institutions is envisaged in 2012. Around EUR 120 million are expected to be absorbed in 2012 under a credit agreement for a programmatic structural adjustment loan extended by the European Investment Bank for the co-financing of projects funded by the operational programmes. The implementation of the Partnership Strategy with the World Bank for the period 2011-2013 is expected to be launched next year as well by three loans of EUR 80 million each for policy development (DPL) for reforms in the railway sector.

In accordance with the State Budget of the Republic of Bulgaria Act for 2012, the amount of new government-guaranteed debt may not exceed BGN 300 million against BGN 460 million for 2011. External government debt repayments are envisaged to be BGN 202 million for 2012. Absorption of funds under government investment loans administered under ministry budgets is expected to be around BGN 266 million as opposed to BGN 106 million of repayments.

It may be concluded that the government debt of the Republic of Bulgaria is well structured. The government policy for debt management in 2012 will also be targeted at reducing the fiscal deficit and preserving the debt/GDP ratio at one of the lowest levels in the EU. Maintaining this Maastricht criterion at the lowest level is a prerequisite for the moderate recovery of Bulgarian economy in the conditions of the debt crisis in the eurozone.