Bulgaria to revise budget, take on ‘billions’ in new debt to fight coronavirus crisis

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SOFIA, March 29 (Reuters) – Bulgaria plans to revise its 2020 budget, prepare to take on “billions” in new debt and allow borrowers to delay loan payments to banks to help cushion the impact of the coronavirus crisis, government and central bank officials said on Sunday.

Bulgaria has already announced an aid package that should ensure 4.5 billion levs ($2.56 billion) to support people on the front line battling the coronavirus, companies, workers and pensioners.

Infections in the country have risen to 346 and eight people have died.

“As early as next week I will propose an initial revision of the budget due to the need to ensure more financing,” Finance Minister Vladislav Goranov told private broadcaster Nova TV.

“That means taking on debt, so that we will be prepared when the markets present a possibility.”

When asked how big the new debt will be, he said “billions”, adding that his ministry was still calculating the impact of the crisis on the small and open economy of 7 million people.

Bulgaria planned to balance its budget this year, after running one-off fiscal deficit of 1% of economic output in 2019 due to its deal to buy new F-16s for the army. It is also one of the least indebted European Union member states.

Bulgaria’s central bank has asked commercial banks in the country, of which more than 75% are owned by banks in the EU, not to pay dividends and decrease their deposits abroad to strengthen their capital and ensure liquidity.

Speaking to Nova TV, central bank Governor Dimitar Radev said that the European Banking Authority was expected to approve by Wednesday guidelines and criteria on measures that focus on imposing of a temporary moratorium on banking loan payments.

The central bank will give flexibility to the banks, so that they do not weaken their positions regarding capital adequacy and credit risk management when looking at the individual needs of loan and mortgage holders, Radev said.

“The banking sector is in a very good condition. We can say it is ready, especially if we speak for three to six months horizon, for this crisis,” Radev said.

$1 = 1.7550 leva
Reporting by Tsvetelia Tsolova. Editing by Jane Merriman

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