Bulgaria

Bulgaria for many years had a command economy with no real monetary policy, and when that changed it experienced repeated difficulties in monetary control and financial development; in 1998 it introduced (as a last resort) an augmented currency board which has been relatively successful.

Years Targets and attainment Classification
1974-89 state planning with no real monetary policy, financial developments subordinate to plan multiple direct controls MDC
1990-97 two-tier banking system from April 1990 but instruments initially limited and mostly direct (credit controls); recurring fiscal dominance (from both budget deficits and distressed borrowing by SOEs) despite 1991 law affirming independence of central bank; over time some rise of interbank, forex and government securities markets and some switch towards indirect instruments; trade-offs between objectives unclear and repeated attempts at macro stabilisation not sustained; recurring high inflation with peaks of 398% in July 1991, 122% in January 1995 and 2040% in March 1997; forex and/or banking crises in 1993-4 and 1996-7 unstructured discretion UD
1998-2017 currency board on DM introduced July 1997, as only way to restore confidence and stability, which takes the rest of that year; peg transferred to euro in January 1999; full forex coverage of domestic monetary base required (and exceeded); central bank (which is also supervisor of banks) tried direct credit controls in 2005-6; it makes occasional use of limited scope to adjust reserve requirements and of various macroprudential policies, and it has some scope for lender of last resort operations, increased in 2016 augmented currency board ACB

Selected IMF references: Money, Banking and Credit in the People’s Republic of Bulgaria, 1974, especially pp1-5, 10-11; Bulgaria: Calculation of Quota, 1990, pp48-56; RED 1991 chapter V and pp48-9; RED 1993 pp38-9; RED 1995 pp36-51; REDSA 1999 chapters VI and VII; SISA 2004 chapter I; SISA 2006 p62; SI 2009 pp56-9; SR 2018 p16.

Additional source: Wolf et al (2008, especially ch12).

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