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
1998-2014 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) makes occasional use of limited scope to adjust reserve requirements and of various macroprudential policies, and it has a limited scope for lender of last resort operations; it also tried direct credit controls in 2005-6 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.

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

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