Bulgaria Mulls Depositing Fiscal Reserve in Banks - Reuters

It quoted Bulgarian Finance Minister Simeon Dyankov as saying on the sidelines of a conference that concrete plans for the reserve would be discussed only after the new government, which came to power as a result of the July 5 elections, achieved a balanced budget this year and parliament approved a balanced budget for 2010, Reuters .

Bulgaria operates under a currency board regime since 1997, which obliges it to keep a fiscal reserve to protect its lev currency peg to the euro and meet foreign debt payments. Currently, the government keeps the reserve, which stood at 7.7 billion levs ($5.88 billion/3.94 billion euro) at the end of August, in deposits at the Bulgarian central bank and is part of its foreign currency reserves. It earns the government 0.5% a year, Reuters reported.

"The idea is not to spend the reserve, but to see whether we can boost the profitability from the funds there. For ten years we have lost, or rather not won a couple of billions, because the reserve was not flexibly used", Reuters quoted Dyankov as saying.

He declined to comment what percentage of the reserve might be deposited with local banks. Bulgaria has 29 commercial banks, majority of which are foreign-owned.

Some economists criticised the idea, saying foreign investors would only notice the drop in the central bank's foreign currency reserves which could increase risks for the EU's poorest member state, Reuters said.