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IMF warns Bulgaria about expanding current-account deficit

The International Monetary Fund warned Bulgaria its widening current-account deficit is increasing the country's exposure to external risks and urged it to sustain high budget surpluses.

From now on, the International Monetary Fund will review Bulgaria's economic policies once a year, as it does with other European Union members, the Finance Ministry said in an e-mailed statement yesterday. Bulgaria joined the EU on January 1. Bulgaria's current-account gap widened to an eight-year record of €3.87 billion ($5.2 billion), or 16% of GDP, last year, topping the government target of 14.1%. Bulgaria aims to narrow the deficit to 13.% of GDP this year, 12.8% in 2008 and 12.4% in 2009 on expectations its new EU membership will help boost trade.

Bulgaria had a budget surplus of 3.5% of GDP last year and has planned a surplus of about 1% of GDP this year. The IMF has urged the government to sustain a budget surplus of more than 2% of GDP. Bulgaria had record foreign investment of €4 billion last year, which covered the current-account shortfall. EU membership spurred foreign investment as more foreigners invested in Bulgarian real estate and new factories. (Bloomberg)