With protestors calling for its resignation, the recently-appointed Bulgarian government received precious support from the IMF on July 3. Concluding a mission visit to Sofia, the international lender gave its backing to plans to try to help the country's poorest and deflate the anger on the streets.
Michele Shannon, IMF Mission Chief for Bulgaria, said in a statement: "The new government's intention to maintain macroeconomic policy continuity, to increase protection for the most vulnerable in society, and to address key structural rigidities is welcome."
Prime Minister Plamen Oresharski's new government - in office for just over a month - is under huge pressure to quit, as the demonstrations against high power prices that felled the previous administration have broadened into a more general call for the country's political establishment to get its house in order. As the IMF delivered its message, around 5,000 people were gathered outside the government headquarters in Sofia for the twentieth consecutive day to demand Oresharski step down.
The PM last week tried to buy off the protestors by rushing a bill through parliament designed to ease the pressure on the country's most economically vulnerable and slash electricity prices. However, the crowds all but ignored the gesture, with cronyism and corruption now their major complaints.
Motorways and major thoroughfares in Sofia have been blocked, but the IMF insists the protests have had little effect on the economy, for now at least. "Despite the unsettled political situation, hard-earned macroeconomic and financial stability - which has helped to insulate Bulgaria from the severest effects of the global crisis - has been maintained," Shannon said.
The country chief also noted that financial markets have taken things in their stride thus far, and that Bulgarian assets remain amongst the most stable in the region. "Domestic uncertainty and global market turbulence in recent weeks have not had a significant market impact on Bulgaria," the statement reads, "with bond yields and credit-default swap spreads remaining in line with other strong performers in Eastern Europe."
However, despite the thousands in the streets calling for his head, the international lender suggested the PM should look to implement structural reform. "A balanced approach - that emphasizes structural reforms as the key drivers of change - will continue to be essential as the government further defines and implements its economic policies," the statement continued.
"Economic growth is expected to improve only slightly in 2013 from a subdued rate in 2012, and unemployment remains unacceptably high," the IMF concluded. "An uptick in exports and higher absorption of European Union (EU) funds are providing much needed support to the economy, while inflation has declined and is expected to remain low. Risks to the outlook include the uncertainties in the euro area and the domestic political situation."
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