/ world today news/ We do not take out debt, we choose consultants, Finance Minister Vladislav Goranov said these days. “The propaganda machine of the opposition has almost succeeded in suggesting that debt is being taken on at the moment. And we are not talking about taking on debt, we are talking about long-term hiring of consultants. The annual debt limit, according to the law on the national debt, is set annually with the annual state budget”.
However. Without talking about debt, what are these 16 billion that are being discussed in the National Assembly and in all the media? Otherwise, it is so – the debt is determined year by year. Its limit for this year is laid down in the 2015 budget law and is in the amount of BGN 8.1 billion. It is also true that now a debt is not being voted on, but a contract is being ratified with 4 banks, which will be intermediaries in the withdrawal of this debt.
However, a number of questions arise.
Who allowed Goranov on January 6 to sign a contract for dealership and organization for the realization of foreign debt issues in the amount of BGN 16 billion?
Why is the contract with the banks ratified until 2017 and the parameters of the debt set until then, after voting year after year?
On what principle are these banks determined, why exactly?
What makes us commit to the same consultants for years to come? Maybe a fat commission for importers?
And why is the commission that the banks will receive not specified – only 1%, that’s BGN 160 million.
If new debt is to be taken out to cover an old one in the same amount, the external debt should not change much – neither as a percentage of GDP nor in size. Only a year ago, the debt was 17-18% of GDP, and in 2017, 32% appeared. If it is being withdrawn mainly to refinance old debt, why is it jumping? It is logical that there will be an upward adjustment because of interest and because of the funds to compensate the deficit, but moderately. And why are funds now being earmarked for a supposed deficit 2 years from now? As of the end of November 2014, the external debt was 22.8%. Due to the sudden withdrawal of loans in December, it reached 27% of GDP. The debt withdrawn in December is mainly due to KTB and is short-term. This means that its due date is this year and it must be returned, but this is included in the voted budget for 2015, which foresees taking on a new debt of BGN 8.1 billion. Part of this debt has already been taken. It includes a deficit, and it is unclear what else, but no reforms aimed at growth.
Another question – how was the 10% interest rate on this debt determined, given that the most recently realized external debt has three times the lower interest rate? It is true that 10 percent is only a ceiling, but when it is that high, it opens up the possibility of raising the interest rate, which is now low.
And the motives of the importers are incoherent, in addition to unsubstantiated. At the beginning, Martin Dimitrov was angry that we were taking out such a large loan because of Oresharski – he did it. Then it became clear that we would cover old debt maturities and future deficits. On Friday, the version changed. Goranov stated that we are in a hurry to rectify a contract for new debt for the following years to take advantage of the low interest rate that we have now. This is absurd because the high ceiling of 10% implies the opposite. Now: it was not about a new debt, but only about a contract with consultants. Then what are these 16 billion BGN and why does Boyko Borisov claim that if we don’t take them, Bulgaria will collapse? However, he also inspired optimism – GERB had come to power, just like SYRIZA in Greece. Borisov recalled that for a year and a half they had been warning that the “Oresharski experiment” would collapse the state. “Well, after it the state collapsed, let the peasant from Bankya come again and pull the cart,” Borisov joked.
The “peasant from Bankya” seems to have conveniently forgotten, but we don’t, that in 2009 he took over the country from the “communists” with BGN 10 billion in external debt and BGN 8.3 billion in fiscal reserves. After 3.5 years of management, GERB left it with a reserve melted down by half – to BGN 4 billion, and a debt increased by BGN 4 billion – to 14 billion. It was not clear where these BGN 8 billion went as there was no development , and on the contrary – a policy of strict restrictions, which led to a decline. GDP growth of 6.3% fell below 2% and foreign investment hit rock bottom. During his reign, the number of
the unemployed reached 450,000, over 100,000 small and medium-sized businesses went bankrupt, inter-company indebtedness hit record levels and the economy froze. People disenfranchised, unable to pay their bills, took to the streets and “overthrew” the cabinet. His successor, Oresharski, took over the state with a reserve in the treasury of less than BGN 4 billion, and left nearly BGN 9 billion and a debt of BGN 17 billion. Now the debt is over BGN 22 billion. What is coming out – the “communists” are accumulating – GERB and the Democrats spend? Well, at least we understood where the “wagon” was taking us… to the swamp.
However, we did not understand anything else. Since it is not about a new debt, but only about choosing consultants – what exactly will the parliament vote on Wednesday and with what arguments?
Today, Martin Dimitrov brought “clarity” to Nova TV by saying that we have to withdraw this debt now, because of the low interest rate, which is around 2%. Otherwise, the state goes bankrupt. Should we withdraw a debt scheduled for 2017 now?
The finance minister explicitly said two days ago that the annual debt limit, as per the National Debt Act, is set annually with the annual national budget. That is, it cannot be determined and withdrawn now, although it is known what maturities on old debt are coming up in the following years. He explained that the parameters of 16 billion that we have set now, that is, the long-term planning, were to show that “the Bulgarian government has a strategy and tools with which to finance the large volumes of debt maturing in the next three years and the deficits that do not are predetermined, but are indicated in the three-year budget forecast”. And what compels our country to show this, since there are no crisis or other unusual circumstances requiring such an unusual practice? In his words, this was done as “a kind of presentation of the state to the external financial markets, so that they can orient themselves and propose price levels”. To orient themselves now for 2 years from now? They have no way of proposing price levels of interest for a financial operation that will not happen now, but in two years. Asked to explain the agreed interest rates, Vladislav Goranov stated that the cost of financing is determined at the time of taking on the debt. That is, when we take out new debt in 2016 and 2017, there is no guarantee that the interest rate will be as low as it is now, to justify the rush to negotiate and determine the size of the debt now. In other words, the minister contradicted himself.
In the end – are we now withdrawing all the debt, as Martin Dimitrov says, are we only negotiating this debt, or are we only ratifying contracts and commissions with intermediary banks for debt, the amount of which is determined by 2017, which is again contrary to the budget law? It was also not clear why the state would go bankrupt if we did not take on this debt, with such a high available reserve at the moment. The only ones about to fail in this story are truth and logic. And not to accuse their critics of propaganda, but to sit down and clearly explain without contradictions what they are doing and why. Because we will pay the bill.
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