Chapter

BULGARIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
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, which has since been replaced with the euro at the rate of lev 1.95583 per €1. The BNB is required to buy and sell euros on demand against leva on the basis of spot exchange rates that may not differ from the official exchange rate by more than 0.5%, inclusive of any fees, commissions, and other charges to the customer. Effective August 22, 2003, cash transactions involving an exchange rate that differs from the official rate by more than 10% require a written contract.
Exchange taxYes.
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.
Controls on the use of domestic currencyYes.
For current transactions and paymentsYes.
For capital transactions
Transactions in capital and money market instrumentsYes.
Credit operationsYes.
Payments arrangements
Bilateral payments arrangements
InoperativeThere are arrangements with Albania, Cambodia, Guinea, the People’s Democratic Republic of Korea, the Lao People’s Democratic Republic, and the Syrian Arab Republic. Bulgaria has outstanding transferable ruble accounts with Cuba and Mongolia.
Regional arrangementsBulgaria is a member of the CEFTA.
Barter agreements and open accountsThere are inactive agreements with the Islamic State of Afghanistan, Guyana, Mozambique, 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 IMF Executive Board Decision No. 144-(52/51)Yes.
Payments 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 tradeResidents 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 with precious metals and stones are obliged to register with the MOF within 14 days of starting their activity. Natural persons may freely export and import 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 commercial banks.
Controls on exports and imports of banknotes
On exportsResidents and nonresidents may export domestic or foreign currencies without a declaration if the amount is less than lev 5,000 or the equivalent. Exports of amounts between lev 5,001 and lev 20,000 or the equivalent must be declared; for amounts exceeding this limit the origin of funds must also be declared. In the case of exports exceeding lev 20,000 or the equivalent, residents and nonresidents must obtain a certificate from the tax authorities that they do not have any tax arrears, but nonresidents may export the currency after declaration without certificates for the origin of funds and the tax authorities’ certificate if the amount does not exceed the imported and declared sums.
Domestic currencyYes.
Foreign currencyYes.
On importsResident and nonresident natural persons may import unlimited amounts of domestic and foreign currency; amounts exceeding lev 5,000 or its equivalent must be declared to customs.
Domestic currencyYes.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyBalances on these accounts earn interest at international market rates. The crediting and debiting of up to the equivalent of lev 5,000 in foreign currency accounts are not subject to regulations. On August 8, 2003, this level was increased to lev 10,000. Transfers abroad may be made only by commercial banks after declaring, for statistical purposes, the reason for the transfer. For payments abroad, the declaration must be submitted on the same day; for receipts, within 10 days after the date of the bank statement. On July 7, 2003, this period was increased to 30 days. In cases where amounts exceed the equivalent of lev 20,000, the transferrer must submit documentation as prescribed in BNB regulations. On August 8, 2003, this was increased to lev 25,000. If the transfer is related to transactions for which BNB registration is needed, the commercial bank will verify the declaration with the BNB.
Held abroadYes.
Approval requiredApproval is not required, but a declaration must be submitted to the BNB within 15 days after a payment is made.
Accounts in domestic currency held abroadApproval is not required to maintain these accounts, but a declaration must be submitted to the BNB within 15 days after a payment is made.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsYes.
Import licenses and other nontariff measures
Negative listImports of certain goods—such as dangerous substances with ozone-depleting potential; machinery and equipment for air conditioning using Freon 12; or refrigerators, freezers, and other equipment using Freon 11 or 12—are banned for health and security reasons.
Other nontariff measuresA registration regime applies to natural gas and scrap, in addition to goods previously covered under nonautomatic licensing, such as narcotics, arms, and nuclear weapons. 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, and gambling equipment.
There are free trade agreements with Turkey and the former Yugoslav Republic of Macedonia.
Import taxes and/or tariffsThere are 22 tariff bands; import 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 27%, and for agricultural goods, 74%. The arithmetic mean tariff for all products is 11.6%. The simple unweighted average level of Bulgaria’s MFN tariffs is 11.10%. The average tariff for industrial goods is 8.62%, and for agricultural products, 21.69%.
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 requirements
Letters of creditYes.
OtherExports of gold, silver, platinum, and articles thereof; solutions containing precious metals; 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.
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.
There are free trade agreements with Turkey and the former Yugoslav Republic of Macedonia.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersYes.
Trade-related payments
Indicative limits/bona fide testPayments abroad for trade purposes that exceed lev 20,000 are processed by banks against the documents required in Regulation No. 28 of the BNB. On August 8, 2003, this limit was increased to lev 25,000.
Investment-related payments
Indicative limits/bona fide testPayments abroad for investment purposes that exceed lev 20,000 are processed by banks against the documents required in Regulation No. 28 of the BNB. On August 8, 2003, this limit was increased to lev 25,000.
Personal payments
Indicative limits/bona fide testThese remittances are not restricted if the amount is less than lev 20,000. (On August 8, 2003, this limit was increased to lev 25,000.) Above this limit, documentary evidence is required.
Foreign workers’ wagesForeign workers’ wages may be transferred abroad, provided applicable taxes have been paid.
Other payments
Indicative limits/bona fide testThese payments are not restricted if the amount is less than lev 20,000. (On August 8, 2003, this limit was increased to lev 25,000.) Above that limit, documentary evidence is required.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsEffective July 7, 2003, the registration requirement for capital transactions no longer applies. Previously, for statistical purposes, registries were kept for transactions and payments between residents and nonresidents and for cross-border transfers and payments by commercial banks, the BNB, ministries and state agencies, the central depository, investment intermediaries, insurance and pension funds, and notaries exceeding the amount determined by BNB regulations, but not less than lev 5,000.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentA declaration to the BNB is required within 15 days of concluding a direct investment abroad. Direct investment abroad occurs when a resident (1) acquires equity participation in a nonresident juridical entity and is eligible to exercise more than 10% (prior to July 7, 2003, 20%) of the voting power at a shareholder meeting, (2) extends a loan for the above-mentioned purpose, (3) makes additional investments to an existing direct investment, or (4) acquires real estate for business purposes. Registration is not required for investments in amounts up to the equivalent of lev 20,000 (on July 7, 2003, this limit was increased to lev 25,000); however, for purposes of balance of payments statistics such transactions must be declared to the BNB within 15 days of their conclusion. For investments exceeding this limit, the appropriate documents must be submitted to a domestic bank.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsFor purchases exceeding lev 5,000, the appropriate documents must be submitted to a domestic bank.
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 transactions
Loans
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 licensed to carry out only domestic transactions.
Maintenance of accounts abroadPrior registration with the BNB is required if the bank is licensed to carry out only domestic transactions.
Open foreign exchange position limitsEach bank must maintain daily (1) a maximum ratio of up to 15% 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 30% 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.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 2003
Exchange arrangementAugust 22. New regulations applicable to foreign exchange bureaus required a written contract for cash transactions involving an exchange rate that differs from the official rate by more than 10%.
Resident accountsJuly 7. Receipts into foreign exchange accounts must be declared within 30 days (previously, 10 days).
August 8. The limit on crediting and debiting domestic foreign exchange accounts without restriction was increased to the equivalent of lev 10,000 from lev 5,000, and the limit at which documentation is required was increased to lev 25,000 from lev 20,000.
Payments for invisible transactions and current transfersAugust 8. The indicative limit on trade-related payments, investment-related payments, personal payments, and other payments was increased to lev 25,000 from lev 20,000.
Capital transactions
Controls on capital transactionsJuly 7. The registration requirement for capital transactions was lifted.
Controls on direct investmentJuly 7. The limit on shareholder voting power in a nonresident juridical entity at which direct investment abroad occurs was reduced to 10% from 20%.
July 7. The limit at which direct investments abroad are subject to registration requirements was increased to the equivalent of lev 25,000 from lev 20,000.

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