Bulgaria - Money

The Bulgarian National Bank (BNB) is the bank of issue . It controls government funds and state-owned enterprises. All banks were nationalized in 1947, but since 1990, private banks have been established and international banks allowed to enter the market. The banking sector has been consolidated, and complete privatization of the remaining state-owned commercial banks was expected by 2001.

The Bulgarian currency plunged dramatically in late 1996 and early 1997, reaching a low of approximately 3,000 leva per US$1. Many banks that had extended loans to failing concerns, both state-owned and private, were forced into insolvency. By early 1997, most banking institutions were bankrupt or had closed doors to depositors. The new government that took office in May of 1997 committed itself to stringent financial and structural policies for dealing with this drastic situation and received the encouragement of backing from international financial institutions.

Since July 1997, as required by the International Monetary Fund (IMF), the Bulgarian government has been operating under the control of a currency board . This body rules that the BNB must hold hard currency reserves in leva to cover circulation and banking reserves. Further, the currency board dictates that the BNB cannot refinance commercial banks except in an emergency and restricts the government's freedom to take on new financial liabilities or provide sovereign guarantees. The lev was tied to the German mark and later to the euro at a fixed rate, and in 1999 the currency was redenominated (new bills and coins were issued and the exchange rate was fixed at 1 lev to 1 German mark).

Under IMF conditions for strict financial discipline, the government was pledged to close loss-making enterprises and speed privatization, bank reform, and restructuring. It issued an isolation list of loss-making state enterprises, that is, companies denied access to commercial

Exchange rates: Bulgaria
leva (Lv) per US$1
Jan 2001	2.0848
2000	2.1233
1999	1.8364
1998	1,760.36
1997	1,681.88
1996	177.89
Note: On July 5, 1999, the lev was redenominated; the post-July 5, 1999lev is equal to 1,000 of the pre-July 5, 1999 lev.
SOURCE: CIA World Factbook 2001 [ONLINE].

credit unless they privatize. These accounted for half of the public sector, but by 1999 the government succeeded in privatizing, or beginning liquidation of, all such companies. In the early 1990s, there were 30-40 virtually unregulated stock markets in Bulgaria, most of whose listed firms turned out to be dealing in pyramid schemes . A national stock exchange opened in October 1997, but daily turnover has seldom been more than $200,000, and rarely exceeded $1 million, even in 1998.