One can hardly question the positive effects of the currency board on the economy and income in Bulgaria. Probably, this fact explains why the fifth anniversary of the currency board past without the typical criticism of the system. The analysis "Monetary Policy: Five Years Bulgarian Currency Board" by Martin Zaimov and Kalin Hristov, which was published (or just excerpts) in many magazines and newspapers, lists all reasonable arguments in favour of the currency board. Some of them are listed below, organized in way that takes into account readers' political preferences. Expectations and Facts Those who are concerned whether the government has enough money to redistribute or spend on big public projects, arbitrarily called socialists, should consider the fact that the government revenue has been increasing since 1997. 1. The average budget deficit for the period 1991-1996 (the first years of transition) is 6.9% of the GDP. In comparison, after the establishment of the currency board, the deficit has declined to 0.9%. Another factor revealing the increase in government redistribution abilities is the dynamics of government debt. Its domestic equivalent in 1991 is 13% of the GDP, while in 1996 it rises to 60% of the GDP. The dynamics of the external debt is even more revealing: 168% in 1991,127% in 1992, 109% in 1993, 129% in 1994, 242% in 1995. In contrast, the internal debt for 2002 will be 6% of the GDP and the external one will be 60% of the GDP. 2. There is also a minority group whose views on economics may be labeled "capitalist." It seems that an increase in the net income of the private sector, as well as the improvement of the mobility of goods, capital, and people, will match the expectations of this group. The developments since 1997 have been contributing to the improvement of the economic environment. Bank assets that can be invested have increased since 1997. This development originates from the liquidation of inefficient institutions in the system, the end of government subsidies given by the central bank, and the record high decrease, even in comparison, in the number of bad credits 3. The academic observers of economic life and the abstract thinkers concerned about the standard of living also have reasons to be satisfied by the influence of the currency board. This claim is supported by the performance of major economic indices. The average inflation between 1991 and 1997 was about 240%, while the average decrease in the GDP equaled -4.9%. The inflationary tax reached about 50%; that is, the decrease in the wealth of those who earned and/or saved in levas equaled the above-mentioned percentage. The years after the introduction of the currency board witnessed an average 4% increase in the GDP and inflation of 5.85%, while the inflation tax equaled, as follows: 1.6% in 1998, 6.5% in 1999, 10.1% in 2000, and 4.6% in 2001. Uncertainties Thus, it seems reasonable to expect that the public should be satisfied by the performance of the currency board. So far, nobody questioned the facts associated with the positive economic developments in the recent years. As mentioned many times before, the governments since 1997 (regardless of their assessment of their own policies) have continued to increase their intervention in the economy. That is, they performed as good socialists. This attitude corresponds to the public opinion during the last presidential elections. Despite the obvious benefits for everybody, there are persisting complaints about the "fearful limitations" imposed by the currency board. These complaints are muted only by the embarrassment from the fact that so many famous experts support the currency board. Unfortunately, although the present government claims that it will do its best to maintain the present status quo, it is constantly generating ideas that undermine the stability of the currency board. Thus, there is only a superfluous public consensus about the need to maintain the board. Unofficially, the pile of ideas undermining the macroeconomic stability continues dangerously to grow. The most probable explanation is the narrow interest of all above-mentioned groups to increase their disposable income at the expense of the others. |
