The foreign reserves of Bulgaria's central bank (BNB) inched down 0.2% m/m and 1.8% in a week to EUR 14.3bn as of July 5. The government's deposit fell to BGN 5,068mn from slightly over BGN 5,400mn at the end of June which means that the government has withdrawn around 7% of the fiscal reserve in the first week of July.

At the end of June the country's foreign reserves shrank 1.7% m/m to EUR 14.6bn, dragged down by a negative change in the market value of the central bank's assets. Almost all of that change is attributed to the fall in the price of gold in June as a result of which the value of BNB's gold reserves fell 15% m/m. The drop translated into a BGN 444.9mn contraction of the banking department deposit, i.e. the excess of the BGN equivalent of foreign exchange reserves over the total amount of BNB's monetary liabilities.

Meanwhile, BNB's liabilities to commercial banks decreased 2.3% m/m as banks withdrew BGN 168mn in June. In addition, the value of the government's deposit at the central bank shrank by BGN 59.8mn (1% monthly decline) to BGN 5.47bn. Currency in circulation added BGN 200mn in June, reaching BGN 9.17bn, thus almost entirely offsetting the decline in the funds the commercial banks and the government keep at the c-bank.

The ratio between Bulgaria's foreign reserves and its short-term external debt as they stood in April (latest available data on short-term debt is from end-April, released in June), improved to 1.48 from 1.36 a year earlier. However, as of May (latest available data on the money supply) the ratio between the country's foreign reserves and the M1 money aggregate deteriorated to 1.19 from 1.23 the year before.