Chapter

BULGARIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 24, 1998.
Exchange Arrangement
CurrencyThe currency of Bulgaria is the Bulgarian lev.
Exchange rate structureUnitary.
Classification
Currency board arrangementAn amendment to the Law on the Bulgarian National Bank (BNB) effectively established a currency board arrangement. The deutsche mark was chosen as the peg currency, and the lev was pegged at the rate of lev 1,000 per DM 1, close to the market rate at that time. Effective January 1, 1999, the euro replaced the deutsche mark as a peg at the rate of lev 1,955.83 per €1. The peg was changed to 1.95583 per €1 with the redenomination of the Bulgarian lev on July 5, 1999. The BNB is required to sell and purchase on demand and without restriction currencies of the former EMU member countries for lev on the basis of spot exchange rates that may not differ from the official exchange rate by more than 0.5%.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsBalances remain on clearing accounts maintained under former bilateral arrangements. These arrangements are now inoperative, and the only transactions that take place on clearing accounts are those that are intended to settle the balances. Valuation and settlement of the balances take place in convertible currencies.
Payment arrangements
Bilateral payment arrangements
OperativeA free trade agreement with Turkey came into effect on January 1, 1999, and one with the former Yugoslav Republic of Macedonia on January 1, 2000.
InoperativeThere are arrangements with Albania, Cambodia, Guinea, the People’s Democratic Republic of Korea, the Lao People’s Democratic Republic, Romania, and Syria. Bulgaria has outstanding transferable ruble accounts with Cuba, Mongolia, and Romania. The settlement of the debit balance with Romania is under negotiation.
Regional arrangementsEffective January 1, 1999, Bulgaria became a member of the CEFTA.
Barter agreements and open accountsThere are inactive agreements with the Islamic State of Afghanistan, Ethiopia, Ghana, Guyana, Mozambique, Nicaragua, and Tanzania.
Administration of controlForeign exchange control is exercised by the MOF, the BNB, the customs administration, and the postal authorities.
International security restrictions
In accordance with Executive Board Decision No. 144-(52/51)Yes.
Payment arrears
PrivateFour commercial banks that are in bankruptcy have outstanding debt-service arrears.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeThe MOF controls the acquisition, possession, processing, and disposal of gold, silver, and platinum. The BNB is the only institution entitled to purchase, sell, and hold gold. All domestic transactions for industrial purposes must be conducted at current prices through the BNB. Commercial banks are allowed to make transactions in precious metals. Resident individuals may hold gold but may not trade or deal in it. Effective January 1, 2000, residents carrying out extracting, processing, or other transactions involving precious metals and stones as their business activity are obliged to register with the MOF within 14 days of starting their activity. These activities are included in the banking licenses of commercial banks.
Controls on external tradeResidents carrying out external trade transactions in precious metals and stones are obliged to register with the MOF within 14 days of starting their activity. Natural persons may export and import freely precious metals and stones for personal use after declaring them to the customs authorities. All amounts exceeding personal use are subject to the trade provisions of the Customs Law.



The export and import of precious metals and stones by mail are prohibited. This prohibition does not apply to the BNB and the commercial banks.
Controls on exports and imports of banknotes
On exportsResidents and nonresidents may export domestic or foreign currencies without declaration if the amount is below lev 5,000. Exports of lev 5,001 to lev 20,000 must be declared; nonresidents must also declare the origin of the funds. In the case of exports exceeding lev 20,000, residents must obtain a permit from the BNB, while nonresidents may export the currency after declaration, provided they previously declared it to customs.
Domestic currencyYes.
Foreign currencyYes.
On importsResident and nonresident natural persons may import unlimited amounts of domestic and foreign currency. Amounts exceeding lev 5,000 must be declared to customs.
Domestic currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may maintain these accounts in Bulgaria. Balances on these accounts earn interest at international market rates. The crediting and debiting of foreign currency accounts are not subject to any regulations. Transfers abroad may be made only by commercial banks after declaring the reason for the transfer or, in the case of amounts exceeding lev 20,000, after documenting the reason for the transfer. If the transfer is related to transactions for which BNB registration is needed, the commercial bank will verify the registration with the BNB.
Held abroadWhile opening accounts with foreign banks is not explicitly banned, like all transfers abroad, transfers from Bulgaria to these accounts are subject to regulation. Prior permission from the BNB and MOF is required.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedThe crediting and debiting of these accounts are not subject to any regulations.
Domestic currency accountsYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
OtherYes.
Import licenses and other nontariff measuresEffective January 1, 1999, the registration regime was abolished for tobacco products, livestock and meat, dairy products, and certain grains and sugar. A registration regime was introduced for natural gas and scrap. Effective January 1, 2000, the registration regime applies to goods previously under nonautomatic licensing, such as narcotics, arms, nuclear weapons, etc. Licenses are required for imports of military hardware and related technologies, natural gas, endangered flora and fauna, radioactive and nuclear materials, Pharmaceuticals, herbicides, pesticides, unbottled alcohol, jewelry, rare and precious metals, asbestos, asbestos products, narcotic and psychotropic products, gambling machines, etc.
Negative listImports of certain goods (dangerous substances with ozone-depleting potential, machinery and equipment for air conditioning using Freon 12, refrigerators, freezers, and other equipment using Freon 11 or 12) are banned for health and security reasons.
Import taxes and/or tariffsImport tariffs range from zero to 74%, and are calculated on a transaction-value basis in foreign currency and converted to leva. The maximum rate of import tariffs for nonagricultural goods is 30%, and for agricultural goods it is 74%. Certain products are allowed temporarily to be imported without customs duties within specified quantities (active substances for the production of insecticides, fungicides, and herbicides, some agricultural machinery and their spare parts, flour, live breeding animals, etc.). Other products are allowed temporarily to be imported without customs duties (equipment, spare parts, information technology products, and chemicals for control of the environment and emissions control; special installations for recovery of poisoned lands; substances, materials, and equipment for replacement of ozone-destruction technologies; equipment, machines, and spare parts used in mines and geological research activities; installations, equipment, and spare parts for production of energy from nontraditional alternative sources; medical equipment for human and veterinary medicine; etc.). On January 1, 2000, the import surcharge was eliminated and the arithmetic mean tariff for all products was reduced to 16.18% from 17.88%. On January 1, 2000, this mean tariff was reduced to 13.76% from 15.2%. Also on that date, certain temporary import tariff quotas were abolished.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsProceeds from exports must be repatriated.
Surrender requirementsProceeds do not have to be surrendered; they may be retained in foreign currencies or sold in the interbank exchange market.
Financing requirementsNo.
Documentation requirementsExports of gold, silver, platinum and articles thereof; solutions; electronic scrap and other products containing precious metals; precious stones; and some varieties of wood must be registered with the Ministry of Trade and Tourism. Effective January 1, 1999, registration (automatic licensing) requirements were abolished for live animals, meat, dairy products, Christmas trees, grapes, wheat, barley, maize, rice, cereal flour, sunflower seeds and oils, sugar, yeast, alcohol, brans, oil cakes, for age, tobacco, skins and hides, and wool. A registration requirement was introduced for scrap metal. Permit requirements (nonautomatic licensing) were abolished for imports of natural gas and exports of live animals. Effective January 1, 2000, registration requirements were abolished for coal, petroleum, textiles, CDs, and ferrous and nonferrous metals and alloys.
Export licensesSpecial licenses are required for the settlement of outstanding balances of multilateral clearing arrangements. Export licenses are required for exports of military hardware and related technologies, endangered flora and fauna, wild plants and animals, livestock, radioactive materials, crafts and antiques, seeds, untreated wood, jewelry, and rare and precious metals. Licenses are normally granted within two working days. On April 27, 1999, the exports to the Federal Republic of Yugoslavia (Serbia/Montenegro) of oil products and some chemical goods (with dangerous substances) were banned for health and ecological reasons.
Without quotasYes.
Export taxesEffective January 1, 1999, the export tax on livestock, scrap, copper products, wool, grain, and raw hides was eliminated. Effective January 1, 2000, the export tax on unprocessed lumber and profiled lumber was eliminated.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Trade-related payments
Indicative limits/bona fide testIf the amount exceeds lev 20,000, payments abroad needed for trade are processed by banks against appropriate documents that prove the necessity of the transfer.
Personal paymentsThese remittances are free if the amount is below lev 20,000. Above that limit, documentary evidence is required.
Indicative limits/bona fide testYes.
Foreign workers’ wagesForeign workers’ wages may be transferred abroad, provided they have paid their taxes.
Other paymentsThese payments are free if the amount is below lev 20,000. Above that limit, documentary evidence is required.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase abroad by residentsPrior registration with the BNB is required.
Bonds or other debt securities
Purchase abroad by residentsPrior registration with the BNB is required.
On money market instruments
Purchase abroad by residentsPrior registration with the BNB is required.
On collective investment securities
Purchase abroad by residentsPrior registration with the BNB is required.
Controls on derivatives and other instruments
Purchase abroad by residentsPrior registration with the BNB is required.
Controls on credit operations
Financial creditsPrior registration with the BNB is required.
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsPrior registration with the BNB is required.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsPrior permission of the MOF is required. Nonresidents may not purchase or own land. If they inherit land, they must dispose of it within a three-year period.
Controls on personal capital movements
LoansPrior registration with the BNB is required.
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadPrior registration with the BNB is required if the bank is only licensed to carry out domestic transactions.
Maintenance of accounts abroadPrior registration with the BNB is required if the bank is only licensed to carry out domestic transactions.
Open foreign exchange position limitsEach bank is required to observe daily (1) a maximum ratio of up to 25% between its open position in any particular currency and the amount of its own funds, excluding the euro and the currencies of the EMU countries; and (2) a maximum ratio of up to 60% between its net open foreign currency position and the amount of its own funds, excluding the euro and the currencies of the EMU countries.
On resident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 1999
Exchange arrangementJanuary 1. The euro replaced the deutsche mark as a peg at the rate of lev 1,955.83 per €1.



July 5. The lev was redenominated by removing three zeros and the key peg was changed to lev 1.95583 per €1.
Arrangements for payments and receiptsJanuary 1. Bulgaria became a member of the CEFTA.



January 1. A free trade agreement with Turkey came into effect.
Imports and import paymentsJanuary 1. The Export and Import Trade Policy Measures eliminated import licenses for natural gas. The registration regime was abolished for tobacco products, livestock and meat, dairy products, and certain grains and sugar. A registration regime was introduced for natural gas and scrap. The temporary import tariff quotas were abolished. The arithmetic mean tariff for all products was reduced to 16.18% from 17.88%. The maximum rate of import tariffs for nonagricultural goods was set at 35% and for agricultural goods, at 74%.



January 1. The import surcharge was eliminated.
Exports and export proceedsJanuary 1. The Export and Import Trade Policy Measures abolished the registration requirements for tobacco products, meat, dairy products, wine, and several other products. The license requirements for the export of sunflower oil and livestock were abolished. The export of scrap was required to be registered. The export tax on livestock, scrap, copper products, wool, grain, and raw hides was eliminated.



April 27. Exports to the Federal Republic of Yugoslavia (Serbia/Montenegro) of oil products and some chemical goods (with dangerous substances) were banned for health and ecological reasons.
Capital transactions
Controls on direct investmentJanuary 1. Tax measures introduced in 1999 carried on the reforms, further broadening the tax base and lowering marginal tax rates. Tax holidays and incentives were removed from the Foreign Investment Act and partially offset by a 10% regional investment tax credit under the Profits Tax Act.
Provisions specific to commercial banks and other credit institutionsJanuary 1. Each bank is required to observe daily (1) a maximum ratio of up to 25% between its open position in any particular currency and the amount of its own funds, excluding the euro and the currencies of the EMU countries; and (2) a maximum ratio of 60% between its net open foreign currency position and the amount of own funds, excluding the euro and the currencies of the EMU countries.
Changes During 2000
Arrangements for payments and receiptsJanuary 1. Residents carrying out transactions involving precious metals and stones were obliged to register with the MOF within 14 days of starting their activity.



January 1. A free trade agreement with the former Yugoslav Republic of Macedonia came into effect.
Imports and import paymentsJanuary 1. The arithmetic mean tariff for all products was reduced to 13.76% from 15.2%.



January 1. The registration regime was also applied to goods previously under nonautomatic licensing.
Exports and export proceedsJanuary 1. The export tax on unprocessed lumber and profiled lumber was eliminated.



January 1. The registration of coal, petroleum, textiles, CDs, and ferrous and nonferrous metals and alloys was abolished.

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