In the eight month since sweeping into power, pressured by insufficiency tax revenue, Bulgaria’s ruling party GERB is starting to fulfill its promise to shed minority stakes in various companies.

The aim is to at least partially plug revenue shortfalls and rein in the deficit so that it does not cross the 3% mark, a scenario that would diminish Bulgaria’s chances for swift entry into the ERM II -- the two-year currency stability test before the country can drop the lev and adopt the euro.

By the end of this week, a state consolidation company will be formed that will lump together minority holdings in 55 companies, finance minister Simeon Djankov and his deputy Vladislav Goranov said on Monday. The list features the 33% government share in power distributors, minority state holdings in Kempinski Hotel Zografski, etc.

The consolidated company will offer the stakes on the Bulgarian Stock Exchange (BSE), which is the most transparent and a relatively quick procedure, according to Djankov.

Through an in-kind contribution of minority stakes into the parent company, the difference between the face value and the selling price will count as profit, which will serve as advance dividend payment into the state budget as soon as this year. Thus, the government will skirt the law on the Silver Fund -- a structure set up to offset the extra costs of ageing after 2020 -- which stipulates that the entire privatisation revenue should be used to support the pension system in the future.

The announcement comes amid continuing decline in Bulgaria’s foreign direct investment (FDI) and domestic consumption, as seen by the Bulgarian National Bank (BNB). It also follows the governments’ thwarted attempt to lift healthcare contribution rates, which was at the end of the day swapped for a plan to strip public-sector employees of their welfare preferences.

Speaking to Dnevnik yesterday, employer and union representatives welcomed the government’s sell-off plan, even though they were staunch supporters of the Silver Fund when it was set up in 2008.

Preliminary estimates show the sale of minority state holding via the BSE could bring approximately BGN 500 million for 2010.

The juiciest assets -- such as Bulgartabac’s cigarette factories, the subsidiaries of the Bulgarian Energy Holding (BEH), heating utility Toplofikatsia Sofia -- will be left out of the privatisation scheme.

The Confederation of Employers and Industrialists in Bulgaria (CEIBG) has calculated the Bulgarian government could pocket almost EUR 3 billion if it sells its majority and minority stakes in 18 lucrative companies.

(Dnevnik)

Turnover on the Bulgarian Stock Exchange (BSE) failed to pass the BGN 400,000 benchmark on Tuesday as indices zigzagged by small margins.

Dnevnik 20 of the biggest and most liquid stocks drifted 0.02% higher to 63.89 points and the blue-chip SOFIX put in a better performance of a 0.18% rise, which left it at 420.16 points.

Government plans for upcoming privatisation of assets on the stock market failed to spur on investors, who seem to have lost faith in pledges for state action to set the bourse in motion.

Trading volumes on the official market, excluding block and other pre-arranged deals, totaled a sorry BGN 313,000. A further BGN 420,000 came from the unofficial market, where Intercapital Property Development traded two batches of close to BGN 47,000 and car batter maker saw 43,000 worth of shares change hands.

The broader BG40 slipped by 2%, dragged down by Zaharni Zavodi, the Gorna Oryahovitsa-based confectionery maker, which shriveled 17% to BGN 1.91 apiece, its lowest since early August.

Central Cooperative Bank (CCB) and property fund Exclusive Property sparked strongest interest, one up 1.5% and the other down 0.5%. Together with a 0.28% drop by Real Estate Fund Bulgaria, the latter kicked the sector index BGREIT 0.07% into negative territory at 43.59 points.

(Dnevnik)

Bulgaria’s blue-blooded Corporate Commercial Bank (Corpbank) could become the market’s first player to pay out dividend since the economy imploded.

At their upcoming meeting, shareholders will vote on a proposal to get a gross dividend of BGN 5, or BGN 30 million put together, Corpbank said in a filing with the Bulgarian Stock Exchange. A further BGN 30 million from the bank’s nonconsolidated profit for 2009 will be retained.

Corpbank is the first lender on the Bulgarian market to eye handing out dividend after in autumn 2008 the central bank sent letters to local financing institutions forcing them to skip dividend and build up financial buffers.

For 2009, Corpbank booked a consolidated profit in excess of BGN 63 million. It was one in six banks to pull off higher profits for 2009, when ProCredit Bank posted a 0.50% increase, Citibank, Sofia Branch 41.8%, International Asset Bank 137.4%, Teximbank 82.8%, Bulgarian Development Bank (BDB) 154.5% and Central Cooperative Bank (CCB) 4.1%.

Overall, the sector turned in a profit for 2009 but the crisis splattered in red ink 22 of all 33 market players.

Profits were pressed by surging write-down expenses caused by soaring loan defaults coupled with rising deposit rates.

In end-2009, Bulgarian banks had paid BGN 1.040 billion for write-downs compared with just BGN 330.5 million a year earlier.

Defaults are gathering pace, with loans that are more than 30 days overdue accounting for 13.64% of total gross loan portfolio of Bulgarian lenders at the end of the year.

(Dnevnik)

For the third month in a row, the exports of Bulgarian companies staged an increase, narrowing the trade deficit, show figures by the Bulgarian National Bank (BNB).

In January, the trade gap totaled EUR 173.3 million, speaking for 0.5% of the GDP. On a year-on-year basis, this represents a contraction of 49.5%.

The fall was triggered largely on the back of a 12.8% surge in exports in January compared with the same month of last year as imports continued to lose steam at a slowing pace. For the first month of the year, imports dipped less than 6% versus upwards of 30% on an annual basis only months ago.

The BNB estimated exports at EUR 917 million, while imports came in just over EUR 1 billion.

Georgi Ganev, economist with the Centre for Liberal Strategies, sees the slowing slide in imports as it means more state revenue and indicates that the domestic markets is on the road to recovery, setting the stage for the broader economy to heal.

“Imports are likely to start growing by the end of the quarter,” Ganev told Dnevnik.

The falling trade deficit brought a contraction in the current account gap, which shrank by more than 56% on its January 2009 level to EUR 242.3 million, or 0.7% of GDP. On an annual basis, the deficit accumulated for the past 12 months dropped by 63%.

In 2009, the current account shortfall crashed by an almost threefold decline. The BNB pegged it at 8.6% for end-2009 compared with more than a quarter for the end of the previous year.

But the smaller current account deficit came hand in hand with a new slowdown in foreign direct investment (FDI), which plummeted by 86% year-on-year to EUR 52.9 million in January. This covered just 21.8% of the current account gap against over 70% for the same period of the previous year.

Even if it is plagued by debt troubles, Greek turned out to be the top foreign investor in Bulgaria, pumping in 27% of January’s total investment.

(Dnevnik)

Bulgaria’s public-sector employees, the police, the military and magistrates will pay a portion of social security contributions but some groups will be compensated for the thinner paychecks.

The government will cancel last week’s ordinance for an increase to the healthcare contribution in the private sector to 10% from 8% at present from April 1. Civil servants will pick up the tab for the patchy budget of the National Health Insurance Fund (NHIF).

The police will definitely be compensated but the mechanism is yet to be specified, the Ministry of Finance said.

Djankov declined to elaborate on whether any other groups will get compensation. The matter will de decided at Monday’s session of the national tripartite cooperation council -- a structure which brings together government, employer and employee representatives.

Police unions were the first to lash out on the government for its plans to force public-sector workers to pay their contributions are threatened to come out on strike.

The Ministry of Interior has not yet discussed ways of preserving the wages of the police. Bulgaria might model the mechanism on existing schemes in other European countries, where law enforcement agents received a different treatment to other civil servants, a senior ministry official said.

The source added that the interior ministry will have to cut down costs so that the state could benefit from the change in social security contribution payments.

A total of 150,000 employees in the government and municipal administration as well as magistrates, the military, the police and prison staff will cover as of April 1 40% of their healthcare and pension contributions, with the state paying the balance of 60%. The move is aimed at delivering savings to the tune of BGN 150 million by the end of the year, according to deputy finance minister Vladislav Goranov.

(Dnevnik)

The South Stream gas pipeline, which will cross Bulgaria to carry Russian gas to Italy and Austria, is practically laid to rest and Europe’s gas market is spinning out of control for Gazprom, Newsweek said in an extensive coverage in its Russian version.

Italian energy company Eni chief executive officer Paolo Scaroni proposed at a conference in Huston last Tuesday that South Stream should be merged with Nabucco, which plans to pump gas from central Asia to Europe starting in 2013. The proposal irked Gazprom as Eni had been its only aide in the fight against the anti-Russian Nabucco project, the publication writes.

Scaroni’s proposal triggered off a public row between the two companies. A source close to Gazprom told RIA Novosti that the Italian firm is taking a nonconstructive stance and is standing in the way of entry into the project by France’s EDF. The source further underscored that South Stream will be stalled as long as Scaroni is at Eni’s helm.

The publication warns that the scandal may deal a deadly blow to South Stream, which had not been a very viable project anyway.

(Dnevnik)