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Bulgaria Could Realistically Join Eurozone in 2025: IMF Managing Director

Speaking to the media in Sofia on Tuesday, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the exact date of Bulgaria’s joining the Eurozone is not as important as the accession itself, which could realistically happen in 2025.

“We know that for Bulgaria joining the euro area is a priority, rightly so, because this is a way in which we can improve the competitiveness of the Bulgarian economy, reduce transaction costs in trade and in the financial sphere, for some sectors of the economy increase Bulgaria’s attractiveness and make it more attractive for inward investment,” Georgieva said.

In her words, everything is being done to enable Bulgaria to meet all the indicators for Eurozone membership by the end of this year. “In my opinion, there are good conditions for the country to meet them by the end of the year, which will mean that next year at some time it could be in the euro area,” Georgieva added.

According to the IMF Managing Director, the Bulgarian government must be particularly careful with instruments that affect price movements not only in view of the country’s for Eurozone entry but also because inflation affects particularly badly the poorer population.

Addressing popular fears regarding the euro changeover, Georgieva said that while there will be a nostalgic side to leaving the lev in history, Bulgaria does need the competitiveness that the euro will bring.

She noted that currently Bulgaria is in a unique position, as due to the currency board Bulgarian monetary policy is determined by the European Central Bank, but this country cannot influence the policy as the other Eurozone members do. According to her, entering the euro area is the responsible decision for Bulgaria.

Georgieva said that Bulgaria’s economy looks good compared to the world. Bulgaria managed to keep growth in positive territory both last year and this year. For this year, the forecasts are around 2.7%, she pointed out, adding that more details on the subject will be available on March 19 at the conclusion of the IMF expert mission which is visiting Bulgaria. Meanwhile, inflation has also come down and is expected to fall below 4% by the end of the year, Georgieva said.

Bulgaria is doing very well, except for inflation, which is not our problem, we did not create this inflation, Georgieva noted, adding that it came from two successive shocks – the pandemic, which hit the movement of goods and the functioning of the world economy, and the war in Ukraine, which remains a significant factor for Europe, including Bulgaria, as it very strongly affected energy prices.

According to Georgieva, Bulgaria is among those IMF member states that are a source of good lessons – sometimes painful, but still good.

Responding to a question from BTA during the briefing, Georgieva described the IMF’s relations with Bulgaria as very good. The first part of the history of this relationship was not easy – it was the time when Bulgaria did not have a sound macroeconomic policy and needed not only the Fund’s advice and assessment, but also the Fund’s financing, Georgieva said. In her words, it is not easy for a country to fight these deep problems that the Bulgarian economy had, but Bulgaria fought them and is now in a position not to need funding from the Fund.

“You don’t need money from the fund, if you don’t need our funding, that is a testimony that the country is fine”, the IMF Managing Director said.

She pointed out that the IMF wants to bring to Bulgaria mostly the experience of other countries – what can be done in Bulgarian economic policy that would be appropriate for this country and help it do even better in the future. “We have institutions we can be proud of – one of them is the BNB, we have people we can be proud of who have contributed not only to the country’s economy but to where the world is going,” Georgieva said.

Asked about what she wants to see in Bulgaria but does not see yet, the IMF Managing Director pointed to the need to focus much more seriously on reducing economic inequality in society. “We have seen a little improvement after COVID, the pandemic has been a source of good economic policy in this respect because governments have had to help the most vulnerable part of the population, but we are still very much behind in terms of how we redistribute success, how we make our society more equitable, and I hope to see in the coming years more attention to this topic and more investment in people,” Kristalina Georgieva said.