Bloomberg News

Bulgaria Cabinet, Central Bank at Odds Over Fund Management

April 11, 2012

Bulgaria’s Cabinet clashed with the central bank over a decision to invest 30 percent, or about 700 million lev ($470 million), of a so-called Silver Fund in government securities and use the return for state payments.

The government decided to change the law regulating the fund where proceeds from state-asset sales are transfered to pay pensions after 2020 so it can be invested in financial instruments yielding higher returns, Finance Minister Simeon Djankov told reporters in Sofia today. The central bank, where the fund is kept on deposits, opposes the move.

The current law allows for the fund’s assets, which total about 2 billion lev, to be invested in foreign bonds, while the government wants to diversify investment options with Bulgarian bonds, the government said in a statement. It plans to increase the amount of assets invested in riskier securities by 10 percent each year, until it reaches 70 percent of the fund’s assets in 2016.

The Bulgarian National Bank “proposes to have this draft law withdrawn,” the central bank said in an e-mailed statement. The decision to introduce it to Parliament for approval, “if ever, should be taken after a serious discussion among all institutions responsible for the macro-economic and financial stability of the country.”

Silver Fund

The Silver Fund is part of Bulgaria’s fiscal reserves and investing a part of it would erode the reserves and turn that part from an asset into a liability, the central bank said. Bulgaria’s fiscal reserve fell to 3.8 billion lev at the end of February from 8 billion lev in July 2009, when Prime Minister’s Boiko Borissov’s administration took office.

Bulgaria, the EU’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from international lenders. The government seeks to cut the budget gap to 1.35 percent of gross domestic product this year from 2.1 percent in 2011 to help contain fallout from the euro debt crisis.

Bulgaria also needs to repay 835 million euros in 11-year Eurobonds maturing on Jan. 15, 2013, and plans to sell Eurobonds worth 950 million euros possibly in June, the government said on April 4. This will be the first time in 11 years that Bulgaria will tap international markets.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at

To contact the editor responsible for this story: James M. Gomez at

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