Market Disciplines

["Chris, London" <100423.2040@xxxxxxxxxxxxxx>]

How would this story read any differently, whatever desirable "-ism"
the Bulgarian government had embraced, or undesirable political
practice it had rejected?

I leave L'st members to insert their own definition of political good and evil.

Nowadays what matters is when the men from the IMF offer "discussions".

Chris

__________________________________________________________________________

FINANCIAL TIMES Friday 10th May 1996.

BULGARIA LIFTS RATES TO 108% TO DEFEND CURRENCY

The Bulgarian National Bank was forced to raise its central interest
rate from 67% to a record 108% yesterday in a move to halt the steep
decline in the value of the lev, the Bulgarian currency.

Bulgaria is facing the most acute financial problems of any of the former
communist countries in central Europe and has lagged far behing the pace
of reform set in other parts of the region.

The currency crisis has been triggered by the shrinking of the country's
foreign exchange reserves with further heavy foreign debt repayments
due in the next two months.

Queues formed at some banks yesterday as Bulgarians sought to withdraw their
savings, but many banks were unable to meet demand according to a Reuters
news agency report. Some shopkeepers were reported to be refusing
to take payment of leva for goods other than food.

Interest rates have tripled this year from 34% at the beginning of January
and were last raised only two weeks ago from 49% to 67% in an effort
to shore up the currency.

Amid the mounting crisis in the foreign exchange market, officials from
the International Monetary Fund have returned to Sofia, the capital, this
week to resume negotiations on a new stand-by agreement.

Earlier talks foundered on the government's inability to push through
urgently needed structural reforms, in particular closure of loss-making
state enterprises and a far-reaching restructuring of the beleaguered state-
owned banks.

The crisis of confidence in the lev has driven the value of the currency
down from 70.70 leva to the US dollar at the beginning of January to a
central bank fixing rate yesterday of 122.56 leva to the dollar... In
street trading the lev has fallen further to between 140 and 160 to the
dollar, although there were signs last night that the emergency rise
in interest rates had strengthened the currency, at least temporarily.

In an effort to support the lev the central bank has sold much of its
foreign currency reserves in the first four months of this year, with
reserves falling to $667m at the end of April from $1.2bn at the end of
last year.

Last night the Bulgarian government was seeking urgently to complete
a list of state-owneed enterprises to be closed down or restructured,
to present the programme to IMF officials today.

The Socialist government led by Prime Minister Zhan Videnov has been badly
split over what measures to adopt to alleviate the growing financial crisis.

In a belated effort to win western support and stave off fears of a possible
default on its foreign debts, Mr Videnov last month promised a programme
to accelerate privatization and close more than 100 state enterprises.

Western officials remain sceptical about the country's real commitment to
restructuring and reforms leading to an open market economy....




Report by Kevin Done, East Europe Correspondent, Financial Times, London.


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