IMF Pledges Support for Public-Sector Reforms, Urges Caution With Wage Increases

The International Monetary Fund supports the Bulgarian Government in its planned reforms in the public sector, Head of the IMF's Mission to Bulgaria and Romania Albert Jaeger said on Tuesday, BTA reports. He was speaking at a meeting with Bulgarian Prime Minister Sergei Stanishev and Finance Minister Plamen Oresharski and was quoted by the Government Information Service.

Tuesday was the last day of an IMF mission for an annual review of Bulgaria's economic development which began on October 4. The mission focused on the measures being taken as part of Bulgaria's fiscal policy, aimed at maintaining a stable macroeconomic environment, pressing on with structural reforms to secure stability in economic growth, and maximizing the benefit from this country's EU membership, said the government press office.

Stanishev told Jaeger that education is a priority for his government and that a complete program for improving its quality and teachers' wages has been planned for the next eighteen months.

Jaeger said that the IMF supports the processes and reforms which will further increase the competitiveness of the Bulgarian economy. IMF experts have noted the need for higher efficiency in the public sector.

The Mission's conclusion is that there is no change in the country's macroeconomic situation since their last visit, i.e. there remains comparatively high economic growth and a widening external current account deficit. The preservation and development of macroeconomic stability and a reduction of the economy's vulnerability to future adverse external developments remain priorities of the fiscal policy. The Mission emphasizes the need to maintain the same fiscal position for 2008, recommending a budget surplus of 3 per cent or more of the GDP.

The projected macroeconomic indicators for next year, set out in the medium-term fiscal framework, include a real growth in GDP of 6 per cent per annum, medium-term inflation of 3.7 per cent falling to 2.6 per cent by the end of the period, with a 2.5 per cent budget surplus.

Dwelling on the areas of concern at a news conference later on Tuesday, Albert Jaeger noted that the high wage demands by public sector unions may result in overheating of the economy. He warned that a high wage increase in the public sector will push up wage demands in the private sector and will worsen inflation and cause problems in external competitiveness. Wage growth should be kept at the level of productivity growth, according to the IMF.

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