With the IMF in town and talk in Sofia of ending any further loans, attention shifted this week to the question of debt in general. The difficulty of finding a reliable method of calculating how the country's borrowing has shifted was given an airing, while the growing role of the private sector in accounting for the nation's debts was given wide comment - along with its implications for the banking sector.
The IMF delegation arrived in the capital March 24, a month after the Fund's last stand-by deal - for $300m - had expired. IMF mission leader for Bulgaria, Hans Flickenschield, told reporters that the Fund was pleased that the country seemed finally to be emerging from its post-Cold War financial doldrums. As a result, any new agreement signed between Sofia and the Fund would likely not include any new loans. Instead, any financing would take the form of a facility available if, and only if, Bulgaria really needed it.
Yet debt refuses to go away as a subject. Partly this was because of a series of related announcements on bankruptcy mid-to-late March, partly this is because reactions to the most recent figures on debt have been so mixed.
Regarding the former, the Public Bulletin of Debtors swelled by 49 citizens and companies March 15. This list records those with major tax debts to the state. The total number now registered is 5,092, with unpaid taxes adding up to Lv1.8bn, or 923.6m euros. Meanwhile, the country's main urea manufacturer declared March 24 that it was to declare itself bankrupt with debts of Lv103m.
This followed a high court refusal to allow the company, Chimco, further time to pay its debts. While there are specific reasons why the company is in such straits - management largely blamed state monopoly Bulgargas for overcharging, and thus rendering Chimco's product uncompetitive - the case also serves to illustrate a growing concern.
Yet, official statistics revealed early March that the level of gross foreign debt stood at 10.42bn euros at the end of 2003. This was some 347m euros less than the previous year, according to one set of calculations, at least. However, as the financial newspaper Capital pointed out in its March 6-12 issue, the exact figure depends very much on where you start measuring from. In keeping with the rest of the Bulgarian economy, financial calculations switched over during that time from US dollars to euros, with the exchange rate - and the exchange rate on which particular day you start counting from - having a decided impact on the health of the figures.
Nonetheless, as a percentage of GDP, the Bulgarian National Bank (BNB) calculated the net foreign debt ratio as 69.6% at the end of 2003, down from 72.3% a year earlier.
Certainly an achievement of sorts, but the curious thing about the statistics for many analysts was the respective shares of the debt between public and private sectors. Private foreign debt had risen by 16.3%, or 459m euros, in 2003, year-on-year. Meanwhile, public sector debt had fallen by 10% in the same period. This left the private sector holding 25.9% of Bulgaria's gross foreign debt at the end of 2003, or 3.266bn euros.
This confirmed a trend visible for many of the past few years, with privately held foreign debt rising an average 21.8% a year since 2000.
Just why the private sector seems so keen to borrow money from outside Bulgaria can be explained by a variety of factors, many of which have important implications for the country's would-be main lenders: the banks. As Capital pointed out, interest rates in other European and Western countries are much lower than at home.
In addition, many companies borrow from other companies, rather than from banks. Some 55% of the new and 35% of the total foreign debt of the non-banking private sector in 2003 was accounted for by loans to Bulgarian companies from foreign companies. The general view seemed to be that this was a much less bureaucratic and faster method of doing business than going to a bank.
Meanwhile, Bulgaria's banks themselves saw their own foreign debt rise by $442m last year. The BNB figures had 80% of this accounted for by bank deposits newly opened by non-residents.
All of which, many analysts suggested, demonstrated the need for further reform of the country's banking system. As Bulgaria moves further towards its European Union membership, the likelihood is that more companies will gain access to foreign loans - which may help fuel economic growth and the introduction of international standards within the financial system, and within companies' own practices. Yet, the worry is that, as with all debt, one day it gets called in. The hope is that Bulgaria's future is rosy enough for that to be a risk worth taking.