The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
This Selected Issues paper for Bulgaria highlights that the rapid credit expansion has not raised significant financial stability issues, but has been a key factor in the sharp weakening of the external current account. Although the deficit has been mostly financed by foreign direct investment (FDI) inflows, deficits of this magnitude cannot be sustained as privatization inflows will dry up with the completion of the government's privatization program. Concurrent with the surge in bank credit, the external current account has weakened, reaching a deficit of 81/2 percent of GDP in 2003.