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Statement of the BNB Governing Council on the occasion of the tenth
anniversary of the introduction of the currency board in Bulgaria,
Sofia, 30 June 2007
On 1 July 2007 we mark ten years since the introduction of the currency board in Bulgaria. The
amendments to the BNB Law of 1997 provided for a fixed exchange rate of 1000 Bulgarian Levs to
a Deutschemark and automatic fixing of the exchange rate of BGN 1.95583 to one euro after 1
January 2002, and the requirement that any Bulgarian levs issued should be at least 100 percent
backed up with international reserves. The law prohibited any extension of credit by the central
bank to the government and commercial banks in whatever form. The amendments to the law
increased the institutional and financial independence of the BNB, as well as the personal
independence of the Governing Council members, thus allowing the central bank to carry out in full
its tasks as a central bank to maintain the stability of the Lev and of the Bulgarian banking system.
The currency board turned into the basis on which the economic policy of three consecutive
Bulgarian governments was built. From a status of utter political, economic and financial crisis
Bulgaria changed into a country with sustainable development, and an economic policy
distinguished for its consistency, transparency and predictability. This prudent economic policy
brought back the confidence of domestic general public and foreign investors alike in the Bulgarian
economy, banking system, and national currency. The stable economic and political development of
the country in the recent ten years made possible our full-fledged membership in NATO and the
European Union.
The currency board proved its viability and sustainability in a period when global economy was
facing a series of shocks. Aided by it, the Bulgarian economy withstood the challenges of the
Russian and the Asian financial crises, the Kosovo crisis, the delayed global economic growth in
2001 as a consequence of the terrorist attacks in the US, and the crash in the prices of high tech
companies’ stocks, the war in Iraq, and the unprecedented price increases of energy resources and
the global imbalances in the recent years. In this period Bulgaria developed with relatively high and
sustainable rates of economic growth, while the rate of domestic employment increased. Owing to
the macroeconomic stability the economy restructured at a higher pace, consequently the
economy’s competitiveness started increasing, and in 2006 Bulgaria was among the few countries
worldwide, which increased their share of imports within the EU. The consumer price growth rate
in the period after 1997 is 5.7 percent on the average, against an average of 233 percent in the
period from1991 to the introduction of the currency board.
The Bulgarian banking system was stabilized, restructured, and privatized, with leading EU
banks as investors. Today the Bulgarian banking market is highly integrated into the European
market. We have highly reputed banks operating on it, which offer on competitive basis a wide
range of banking products and services at reasonable prices that any company or household in the
country can afford.
With Bulgaria’s accession to the EU, we have new vistas opened to the development of the
monetary system. Bulgaria is committed to join the euro area and introduce the single European
currency. The time horizon for meeting the criteria for euro area membership depends on all of us,
as the acquis provides for an obligation of new member states to join the euro area, but sets no
definite period within which this should be accomplished.
All three Bulgarian governments, which have governed the country since the introduction of the
currency board have endorsed the clearly set political commitment that Bulgaria should maintain
the established monetary regime of a Currency Board Arrangement to the time of its euro area
membership, and have pursued a consistent economic policy governed by the aspiration to meet this
political commitment. This policy is in full accord with the decisions of the EU Council and the
European Central Bank. Our experience of the recent ten years indicates that the currency board is
the optimal monetary and currency regime for a small country with an open economy, going
through a period of fast development and full integration into the European economy. The
macroeconomic stability and the predictable business environment created and supported by this
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regime, facilitate the intensification of domestic structural reforms, the increasing labour efficiency
е and productivity, and the growing competitiveness of the Bulgarian economy, respectively.
The currency board does to the greatest extent capture the conditions of operation of an economy
within the euro area. On the one hand, it limits the instruments for pursuing a national monetary
policy at the central bank’s disposal. On the other – the currency board requires to a much greater
extent, and forces the governments to pursue, a prudent fiscal policy of structural reforms aligned
with the principles of the Stability and Growth Pact. This provides the unique opportunity of both
nominal and real convergence of the Bulgarian economy, while maintaining high and sustainable
medium-term rates of economic growth – an opportunity which we should not miss.
The currency board, that has been operating successfully for ten years, will continue to underlie
the macroeconomic stability until Bulgaria joins the euro area. We have gone an important part of
the way to achieving this goal – Bulgaria is an EU member, which meets most of the euro area
membership criteria. It depends on us to go successfully the remaining part of this road. The
government institutions, the civil society representatives, and all that care for the prosperity of our
country, should continue, as till now, to work for setting out and implementing a prudent,
transparent, and predictable economic policy that would improve the business environment and
enhance the effectiveness and competitiveness of the economy. Prudent commitments should be
made, whose implementation would not interfere with achieving the goal of euro area membership,
thus creating further and better opportunities for increasing the welfare of our nation.
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