October 21 (SeeNews) - Prime Minister Boyko Borisov said Bulgaria has abandoned the idea to deposit part of its fiscal reserve with commercial banks as means of generating additional revenue for the government budget, state-run news agency BTA reported on Wednesday.
The fiscal reserve will not be touched, neither will it be transferred, tenders for managing part of it will not be held, BTA quoted Borisov as saying after he met central bank governor Ivan Iskrov.
Finance Minister Simeon Dyankov told a financial conference earlier this week the government was considering the idea of depositing part of its fiscal reserve into commercial banks to boost profitability in times of economic downturn. The reserve, which totalled 7.7 billion levs ($5.88 billion/3.94 billion euro) at the end of August, is kept with the central bank and it earns the government around 0.5% a year.
Bulgaria operates under a currency board system since 1997, a tough monetary arrangement which obliges the government to keep a fiscal reserve to protect the peg of local lev currency to the euro and meet foreign debt payments.
Dyankov's proposal was strongly opposed by local analysts, who said that it will dent the central bank's forex reserves, and decrease foreign investors' confidence.
Borisov said the proposal was just an idea which has been exaggerated, particularly abroad, BTA said.
The government wil do its best to achieve a balanced budget by July, Borisov said. The government has said it will aim to run a balanced budget this and next year.
Analysts and the International Monetary Fund see a gap in the country's budget this year.