Bulgaria's Structural Reforms: The Path to Economic Stability

1. Structural Reforms: The Unfinished Agenda Presentation for the Joint BNB-IMF Seminar on Bulgaria’s Future Challenges “Bulgaria- From Transition to Convergence: The Challenges Ahead” May 2, 2007, Sofia by Dr. Georgy Ganev BMA, SUFEBA, CLS

2. Bulgaria and the IMF overview • Relations started 17 years ago • 4 unsuccessful and then 4 successful agreements between Bulgaria and IMF • Many reforms implemented • No more agreements deemed necessary, with good reasons, • Yet this does not mean the reform agenda is done and over with Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

3. What reforms remain: framework • The general idea of the IMF is for a country to have a sound economy • This involves: • a certain structure of the economy, • a certain economic governance, • a certain macroeconomic policy mix • There are serious reform items left in all three areas Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

4. What reforms remain: economic structure - 1 • Some components of economic structure, just as an example for remaining issues: • Private property, which needs much more • Secure property rights • Privatization, as in energy, health, education, private provision of public goods • Competition, which needs more • Deregulation • Less protection • Less exceptions, privileges, special treatments, caveats Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

5. What reforms remain: economic structure - 2 • Some more components of economic structure, just as an example for remaining issues: • Physical capital, which needs more • Infrastructure of all kinds • Human capital, which needs • Education (initial and life-time) • Health • Incentives (as in the labor market) • Entrepreneurship • Security of contracts • Level playing field Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

6. What reforms remain: economic governance • Some components of economic governance, just as an example for remaining issues: • Better regulation, including • Clearer motivation and definitions • Both ex ante and ex post regulatory impact assessment • Much more clear rules for rule-making • Better administrative services, especially • Timely, with explicit deadlines • Consistent, ergo predictable • One-stop shop • Possibly most important, and also relevant for the next slide, fundamental reform the the expenditure side of the budget Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

7. What reforms remain: macroeconomic policy mix • Some components of macroeconomic policy, just as an example for remaining issues: • Lower taxes • Less distortionary tax structure • More competition as a policy towards inflation under a Currency Board • Preparation for the eventual return to potent monetary policy as a member of the Eurozone • Programmatic budgeting Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia

8. Conclusion • A lot has been done, usually the hard way • A lot remains, there should be no illusions • Reform is an endless agenda • EU money cannot substitute for political will • A general vision about Bulgarian society and its participation in the common economic space of Europe is a sine qua non • While the IMF and the EU have been and will be eager to help, the generation of such a vision is the sole responsibility of the Bulgarians Structural Reforms: The Unfinished Agenda Dr. Georgy Ganev Joint BNB-IMF Seminar, 2007-05-02, Sofia