BULGARIAN NATIONAL BANK€¦ · SDR Special Drawing Rights TFP Transitional and Final Provisions VAT Value Added Tax WB World Bank (International Bank for Reconstruction and Development)

BULGARIANNATIONAL BANK

R E P O RT • J A N UA R Y — J U N E 2 0 0 3

Published by the Bulgarian National Bank1, Alexander Battenberg Square, 1000 SofiaTelephone: (+359 2) 9145 ####Fax: (+359 2) 980 2425, 980 6493Printed in the BNB Printing Center

© Bulgarian National Bank, 2003

The contents of the Report of the BNB for January − June 2003 may bequoted or reproduced without further permission. Due acknowledgment isrequested.

Web site: www.bnb.bg

Honorable Mr. Chairman

of the National Assembly!

Honorable members of Parliament!

In accordance with the provisions of the Law on the Bulgarian National

Bank, Article 1, paragraph 2, the Bulgarian National Bank reports its activities

before the National Assembly. Pursuant to Article 50 of this Law, I have the

honor to submit the semiannual report of the Bulgarian National Bank for the

period ending 30 June 2003.

Ivan IskrovGovernor of the Bulgarian

National Bank

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Bulgarian National BankManagement

MANAGING BOARD

Ivan Iskrov*

Governor

Tsvetan Manchev** Garabed MinassianDeputy Governor

Bojidar Kabaktchiev Georgi PetrovDeputy Governor

Emiliya Milanova Nikolay NenovskiDeputy Governor

* On 9 October 2003 the 39th National Assembly elected Ivan Iskrov Governor of the Bulgarian National Bank.** On 22 October 2003 the 39th National Assembly elected Tsvetan Manchev Deputy Governor of the Bulgarian National

Bank heading the Issue Department.

C o n t e n t s

I. Developments in the World Economy and Finances1. Overview and Major Trends in the Development of the World Economy ........................................... 102. The Developed Countries .............................................................................................................................. 103. The Central and East European Countries ................................................................................................. 11

II. Developments in the Bulgarian Economy1. Economic Growth, Employment and Inflation .......................................................................................... 162. The External Sector ........................................................................................................................................ 23

The Balance of Payments ............................................................................................................................. 23Foreign Trade .................................................................................................................................................. 25Foreign Debt and Debt Instruments ............................................................................................................ 26

3. The Monetary Sector ..................................................................................................................................... 27Monetary Aggregates .................................................................................................................................... 28Credit Aggregates .......................................................................................................................................... 29Scale of Monetization .................................................................................................................................... 31Interest Rates on Commercial Bank Operations ....................................................................................... 31BNB Issuing Policy ......................................................................................................................................... 32

4. The Fiscal Sector ............................................................................................................................................ 34The Consolidated Fiscal Program ............................................................................................................... 34

III. Foreign Exchange Reserve Management1. Amount and Dynamics of Foreign Exchange Assets ............................................................................... 402. Management Strategy for BNB International Foreign Exchange Reserves ......................................... 413. Structure of International Foreign Exchange Assets ............................................................................... 434. Efficiency of Forex Reserve Management ................................................................................................. 45

IV. Liquidity and Financial Markets1. Liquidity ........................................................................................................................................................... 482. The Financial Markets.................................................................................................................................... 52

The Government Securities Market ............................................................................................................ 52The Equity and Corporate Debt Securities Markets ................................................................................. 55

3. The Payment System and Settlement ........................................................................................................ 584. The Credit Register ........................................................................................................................................ 60

Statistical information published prior to 30 September 2003 has been used in the Report for January – June 2003.

V. The Banking Sector and Banking Supervision1. Bank Assets and Liabilities ........................................................................................................................... 642. Compliance with Prudent Banking Requirements .................................................................................... 703. Banking Supervision between January and June 2003 .......................................................................... 75

VI. Research ........................................................................................................................................................... 79

VII. European Integration and International Activity1. European Integration ..................................................................................................................................... 842. Relations with Central Banks ....................................................................................................................... 85

VIII. Bulgarian National Bank Group Consolidated Interim Financial Statements (Unaudited)1. Consolidated Interim Financial Statements .............................................................................................. 88

Statement of Responsibilities of the Managing Board of the Bulgarian National Bank ................... 88Consolidated Income Statement for the Six Months to 30 June 2003 ................................................. 89Consolidated Statement of Recognized Gains and Losses .................................................................... 90Consolidated Balance Sheet as at 30 June 2003 ...................................................................................... 91Consolidated Statement of Cash Flows ..................................................................................................... 92Notes to the Consolidated Financial Statements ..................................................................................... 93

2. Report on the Implementation of the BNB Budget ................................................................................ 109

Appendix ........................................................................................................................................................ 111

BCC Bank Consolidation CompanyBDC Bulgarian Depository Certificate

BGL (Lev) National Currency of the Republic ofBulgaria prior to Redenomination

BGN National Currency of the Republic ofBulgaria after the Redenomination

BIR Base interest rateBIS Bank for International Settlements, Basle,

SwitzerlandBISERA Banking Integrated System for Electronic

TransferBNB Bulgarian National Bank

BORICA Banking Organization for PaymentsInitiated by Cards

BSE Bulgarian Stock ExchangeCB Commercial Banks

CEE Central and East EuropeCEFTA Central European Free Trade Association

CIF Cost, Insurance, FreightCM Council of Ministers

CMD Council of Ministers DecreeEBRD European Bank for Reconstruction and

DevelopmentEC European Commission

ECB European Central BankECOFIN Economic and Financial Council

EFTA European Free Trade AssociationEMU Economic and Monetary Union

EOOD Sole Proprietor Limited Liability Com-pany

EU European Union

Abbreviations

FLIRBs Front-loaded Interest Reduction BondsFOB Free on Board

FOMC Federal Open Market CommitteeFRS Federal Reserve System

FSAP Financial Sector Assessment ProgramGDDS General Data Dissemination System

GDP Gross Domestic ProductGFD Gross Foreign Debt

IFI International Financial InstitutionsIMF International Monetary Fund

LBNB Law on the Bulgarian National BankLSPDACB Law on State Protection of Deposits and

Accounts with Commercial BanksMF Ministry of Finance

NLO National Labor OfficeNSI National Statistical Institute

OECD Organization for Economic Cooperationand Development

OPEC Organization of Petroleum ExportingCountries

SARS Severe Acute Respiratory SyndromeSBL State Budget LawSDR Special Drawing RightsTFP Transitional and Final ProvisionsVAT Value Added TaxWB World Bank (International Bank for

Reconstruction and Development)ZUNK Bulgarian Abbreviation of the Law on

Settlement of Nonperforming CreditsNegotiated prior to 31 December 1990(LSNC)

I.

Developments in theWorld Economy and Finances

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200310

1.Overview and Major Trends in the Development

of the World Economy

Successive social crises at the beginning of2003 shattered expectations of a global eco-nomic recovery during the current year. Growthforecasts developed at the end of 2002 were re-vised downward in the spring of 2003.1

Discussions aiming to find a way out of theIraq crisis caused tension and uncertainty in themarkets. The price of Brent crude oil was overUSD 30 per barrel in the first quarter of 2003.The beginning of military operations and theirrelatively rapid conclusion caused a recovery inthe markets and petrol prices fell dramatically inApril 2003.2

News of the fatal SARS virus spreadingacross South-East Asia caused deeper pessi-mism. Growth forecasts for Asia were revised

drastically downward and the shock was ex-pected to reduce the income from tourism andforeign investment. Measures taken to localizethe epidemic were extremely successful and thethreat of infection was neutralized in severalmonths.

Given the negative effect of the shocks in thefirst half of 2003 the ECB and the Federal Re-serve continued to pursue a policy of interestrate reduction. The ECB decreased interest rateson repo agreements initially by 25 basis pointsat the beginning of March and subsequently byanother 50 basis points to 2% in June. The Fed-eral Reserve reduced interest rates by 25 basispoints to 1% at the end of June. Interest ratedifferential between Europe and the USA fellfrom 1.5% to 1%.

2.The Developed Countries

1 The IMF decreased its global economy growth forecast for 2003 from 3.7% (autumn 2002) to 3.5% (spring 2003). In itsspring forecast, the European Commission revised the expected growth in the eurozone in 2003 downward to 1% whichis almost half last autumn’s forecast of 1.8% growth in 2003.

2 The war in Iraq lasted from 19 April to 1 May. During this period oil prices reached USD 35 per barrel. A week after theend of the war the prices fell dramatically to USD 24 per barrel.

3 Eurostat, European Central Bank and European Commission data for the EU.

The European Union3

Consistent with the expectations, theeurozone posted a zero growth in the first quar-ter and a 0.1% fall in the second quarter of 2003.The positive but very low consumption growthwas insufficient to offset investment and exportdecline. Germany, Italy and the Netherlands re-ported falls in the first and second quarters ofthe period. A negative growth was reported by

Belgium, Denmark and France in the secondquarter. Unemployment continued to grow andreached 8.6% in the first quarter and 8.9% in thesecond quarter. Labor market in the EU wasstrongly inertial and the first months of 2003saw the lag effect of the low growth in 2002. In-creasing unemployment was also one of thefactors that worsened consumers’ expectationsduring this period.

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During the first quarter inflation grew owingto petroleum commodity prices hitting recordhighs and stayed at 2% in the second quarter.Underlying inflation, on the other hand, fol-lowed a downward trend and did not exceed2% over the review period. Short-term interestrates reached record low levels falling from2.9% in December 2002 to 2.1% in June 2003.

In early 2003 the European Commission re-viewed EU countries’ stability programs, statingthat the nominal criterion of 3% budget deficitshould be maintained. Latest ECB forecasts indi-cate4 that Italy, Portugal, Germany and Francewill have deficits of over 3% in 2003. As a result,the overall eurozone deficit will show deteriora-tion instead of the planned improvement.Greater deficits will be caused by higher govern-ment expenditure aimed at reviving growth,problems related to the slow structural reformsin the social sector and labor market, and over-estimated budget revenue in 2003 programs.

The USA5

US economic growth for the first and secondquarters of 2003 was 1.4% and 3.3% respec-tively on an annual basis. Extremely high gov-ernment consumption in terms of military ex-penditure, private consumption and housingconstruction were the reasons behind thisgrowth. The last two GDP components werepositively influenced by low interest rates andrevenue from refinancing of mortgage loans.

During the last two years the US economy’sefficiency improved apace. Labor productivity inthe second quarter increased by 7.2% comparedwith the first, while labor expenditure de-creased by 2.7%. Unemployment continued togrow, rising from 5.8% in the first quarter to6.2% in the second.

First quarter inflation was reported at 3.9%

compared with the previous quarter;6 however,following the decrease in crude oil prices dur-ing the second quarter inflation fell to 1.9%.

Conditions on financial markets deterioratedsignificantly since the beginning of 2003. Indi-ces approached the record lows of October2002. The beginning of military operations inIraq and the fact that they lasted for a short timeeased tension in the financial markets and theyrecovered. Bourse index growth is expected fol-lowing the data of higher than expected com-pany revenues during the first six months.7

Japan8

Initial data on Japanese economic growthwas mostly pessimistic. This was attributable tothe drastic decline in exports, the more so asexports were the driver of the Japaneseeconomy in 2002. Subsequently it was foundthat growth was underestimated in preliminarydata so it was revised to 2.3% for the first quar-ter, accelerating to 3.9% in the second quarter.These positive data was attributable mainly torevised business investment outturns whichgrew to 10.5% in the first quarter and to 20.2%in the second quarter. On the other hand, fol-lowing the end of the war in Iraq and the suc-cessful measures taken to contain the SARSepidemic, Japan’s net exports improved post-ing an increase accompanied by a dramatic fallin imports.

Deflation was combatted only partially. Thebase price index (excluding food and energy)continued hovering close to zero.9 The price in-dex was raised from -0.8% in early 2003 to-0.2% by July 2003.

The Japanese economy was favored by thefact that the country was not affected by the vi-rus of atypical pneumonia despite its closeproximity to the center of infection.

4 ECB, Monthly Bulletin, September 2003.5 Bureau of Labor Statistics, Bureau of Economic Analysis and FOMC data for the USA.6 Accelerated inflation was caused mainly by the 76.5% growth of energy commodities in the first quarter (10.7% over

2002).7 During the second quarter revenues grew by 10.8%.8 Bank of Japan’s data for Japan.9 The main goal of the Central Bank of Japan was to reach a zero level in March 2001.

10 BIS data for the Central and East European Countries, Economic Indicators for Eastern Europe, August, 2003; and BankAustria Creditanstalt, CEE Report, No. 3/2003.

3.The Central and East European Countries10

The Czech economy reported slightly accel-erated growth of 2.2% in the first quarter of2003 on an annual basis attributable to stable

domestic demand maintained by a sizable in-crease in nominal salaries (by 7.4%) and defla-tion in the first quarter. Private consumption


11 About 8% of GDP and 25% of forex reserves.12 Institute for Economies in Transition (Bank of Finland) and GLAVKOMSTAT Rossii data for Russia.13 Industry, construction, agriculture, transportation and retail sales.14 In the first quarter exports exceeded the previous year’s volume growth by 8% and price growth by 61%.15 At the end of 2002 Russia’s public debt amounted to USD 145 billion, or 45% of GDP. The foreign debt to GDP ratio and

the domestic debt to GDP ratio were 36% and 9% respectively.16 Institute for Economies in Transition (Bank of Finland), Central Bank of Estonia and Central Bank of Lithuania data for Es-

tonia and Lithuania.

rose by 4.6% for the quarter. Second quarterpreliminary data does not indicate a change inthe movement of economic indicators. Exportsare recovering slowly and are expected to con-tribute to improvement in the balance of pay-ments current account. Unemployment de-creased slightly from 10.2% in February to 9.5%in June.

In June the government adopted the long-expected package of reforms aimed at decreas-ing the budget deficit to 4% in 2006 and to 3%in 2008. The package includes measures to re-duce public expenditure and increase the taxburden.

The Czech Republic voted yes in the referen-dum on EU accession held in June by a major-ity of 77%. Turnout was 55%.

In early 2003 Hungary experienced a specu-lative attack on its national currency. The forintdepreciated against the euro by over 15% andthe fall was stopped by the central bankthrough interventions in the open market andinterest rate reductions. As a result, forex re-serves increased by EUR 5 billion.11 Yield onshort-term government securities decreasedfrom 7.5% to 5.5% owing to enhanced demandand reduced short-term interest rates. The ac-tions of the central bank were assessed posi-tively but it had to renounce adherence to its in-flation target in order to adjust the exchangerate against the euro.

In May the government took measuresthrough the central bank to devaluate thestrong forint by selling a portion of the accruedexcess reserves. However, lack of coordinationcaused the forint to depreciate by much morethan the planned 2.26%. Interest rates increasedfrom 6.5% at the beginning of 2003 to 9.5%. Thedramatic change in government economicpolicy hit foreign investors.

The 2.7% economic growth in the first quar-ter of 2003 was low compared to the previousperiod when growth was estimated at 3.7%. Themajor factor behind this slowdown was thecontraction of budget spending with a view todecreasing deficit to 4.5% (in 2002 the budgetdeficit hit the record value of 9.5%). Despite thetightening of fiscal discipline the deficit reached4.1% in the first six months alone increasing thepossibility of reporting an annual deficit of over

5%. Private consumption also rose considerablyreflecting indirectly the 10% retail sale pricegrowth in the first quarter on the same period in2002. Real salaries increased by 13.7%.

Unemployment rose in the reporting periodstaying at levels of over 6%. Inflation declinedto 3.6% in May, but depreciation of the forintpushed it up again to over 4% in subsequentmonths.

Hungary posted a low turnout of 46% in thereferendum on the country’s accession to theEU; 84% voted yes.

The Polish economy continued growinggradually from 2.2% in the first quarter to 3.5%in the second. The main growth drivers were in-vestment in inventories and net exports. Do-mestic demand declined dramatically, privateconsumption decreasing by 1.4% in the firstquarter. In the first and second quarters unem-ployment stayed relatively high at 18.7% and17.8% respectively. Average inflation for thefirst six months was extremely low, 0.5%, de-spite the continued depreciation of the zloty (by11% in the review period).

In the referendum on the country’s accessionto the EU 77.5% voted yes. Turnout was 58.9%.

The growth of the Russian economy12 accel-erated in early 2003, coming to 6.8% in the firstquarter on an annual basis. Five important eco-nomic sectors13 posted some 7% growth for thefirst six months owing to higher exports as a re-sult of raised oil and metals prices.14

Inflation fell from 14.8% in the first quarter to13.5% in the second quarter but stayed higherthan the 10–12% target inflation set by the Cen-tral Bank of Russia for 2003.

In March the government approved the ma-jor principles of government debt managementfor the period from 2003 to 2005.15 Their majorgoal is to reduce the debt to GDP ratio to 29–30% by the end of 2005. The strategy will focuson the assumption of new obligations. The gov-ernment adopted a decision to reduce signifi-cantly the assumption of new credits fromOECD countries and international financial insti-tutions.

The Estonian economy16 maintained agrowth of over 5% (5.2% for the first quarter).The major growth sources in early 2003 werethe financial services sector and industry.


Transportation, communications and construc-tion reported an insignificant increase, and agri-culture a decrease. In June inflation in the coun-try reached a record low of 0.3% on an annualbasis, reflecting a fall in mobile phone callscharges, clothing, fuels, as well as the apprecia-tion of the euro against the US dollar leading toa fall in the prices of imports in US dollar terms.An extremely high balance of payments currentaccount deficit was reported in the first quarter,accounting for 19.7% of GDP, 80% of which fi-nanced by direct foreign investment.

Lithuania’s considerable growth of 9.4% inthe first quarter on an annual basis surprisedanalysts. Major factors behind it were exportsand stable domestic demand. Deflation of 1.2%was reported in the first six months of 2003. Inthe period under review unemployment fell bysome three percentage points to 11.1% (partlyowing to changes in computation methodol-ogy). The referendum on the accession of thecountry to the EU held on 10 and 11 May clearlymanifested Lithuania’s willingness to become afull member: 91% voted yes; turnout was 64%.



II.

Developments in theBulgarian Economy


1.Economic Growth, Employment and Inflation

Economic GrowthAgainst a background of worsened interna-

tional economic conditions and business andconsumer pessimism in the EU and the USA,data on the Bulgarian economy was favorablein the first half of 2003. Industrial production in-

dex posted a 15% real growth and industrialsales increased by 19% in real terms on the cor-responding period of 2002. Export sales rose by40% in real terms and domestic market sales by5%.

Domestic demand was high. According topreliminary NSI household budget surveysdata, consumer expenditure per householdmember increased by 6% in real terms for thefirst six months of the year. Data on the struc-ture and dynamics of household expenditure in-dicated two vergent and partly contradictorytrends. On the one hand, there was an unfavor-able trend to growth in household expenditureowing to power and heating price rises. On theother hand, there was continuing expendituregrowth and diversification of furniture andhousehold equipment purchases, including ap-pliances, home improvements, and consump-tion of communication, transportation and rec-reation services: a clear sign of an improvingstandard of living.

REAL GROWTH IN INDUSTRY(%, on corresponding period of previous year)

2002 2003

I quarter II quarter III quarter IV quarter Total I quarter II quarter January–June

Output -4.4 7.8 8.7 6.4 4.6 18.2 12.0 15.0

Sales -9.7 3.0 8.0 3.9 1.3 21.6 15.8 18.6

exports -16.4 7.4 14.6 14.0 4.6 50.3 32.0 40.3

domestic market -5.6 0.4 4.0 -1.3 -0.7 6.3 3.7 5.0

Sales growth, share

exports -6.2 2.7 5.5 4.8 1.7 17.5 13.7 15.5

domestic market -3.5 0.3 2.5 -0.9 -0.4 4.1 2.1 3.1

Source: NSI.

REAL GROWTH BY INDUSTRY(%, on corresponding period of previous year)

Industry

January–June 2003

total exports

Smelting and casting 41.1 52.3

Food and drinks 17.4 25.1

Clothing 27.8 48.8

Machines, tools and appliances 19.3 41.8

Textile 39.1 55.0

Chemical products 12.2 23.7

Tobacco 30.9 108.1

Source: NSI.

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Higher household consumption reflectedgrowing incomes. Income per household mem-ber rose by some 9% in real terms, includingsalary income rises of 14% and pension incomerises of 8%. Higher incomes, increased credit-worthiness, and consumer credit additionallyboosted households’ purchasing power. Ac-cording to data on household budgets, creditextended to households by banks rose by over60% in nominal terms for the first six monthson the corresponding period of the previousyear. Monetary statistics reported an averagegrowth of 54% which fully supported the reli-

ability of information on household budgets.Another indicator of enhanced domestic de-

mand was the dynamics of retail sales whichrose in real terms from 2.1% in the first quarterto 3.8% in the second quarter (by 3% in realterms for the first six months of 2003). Incomefrom retail sales increased by 4.6% in the periodunder review, that from household equipmentsales posting the highest growth of 15% (by11.5% and 18% for the first and the secondquarters respectively). These results for internaltrade match the trends in household consumerexpenditure.

STRUCTURE OF HOUSEHOLD CONSUMER EXPENDITURE(%)

January–June 2002 2002 January–June 2003

Total consumer expenditure 100.0 100.0 100.0

Food 49.2 49.1 45.8

Alcoholic drinks and tobacco products 4.2 4.5 4.4

Clothing and footwear 4.0 4.2 3.8

Housing, water, electricity and fuels 15.9 15.7 17.1

Home furniture and maintenance 3.4 3.4 3.5

Healthcare 5.1 4.7 5.6

Transport 5.7 5.9 6.5

Communications 5.1 4.9 5.7

Leisure, entertainment, education and recreation 3.5 3.8 3.7

Miscellaneous goods and services 3.9 3.8 4.0

Source: NSI.

REAL CHANGE IN HOUSEHOLD CONSUMER EXPENDITURE(%, on corresponding period of previous year*)

2002 2003

I quarter II quarter III quarter IV quarter Total I quarter II quarter January–June

Total consumer expenditure 4.4 5.6 9.0 14.6 8.7 6.7 6.3 6.5

Food 2.5 5.9 9.9 13.8 8.6 6.8 2.4 4.3

Alcoholic drinks andtobacco products -2.8 -4.4 -9.3 -3.7 -5.1 1.1 8.4 5.0

Clothing and footwear 3.9 12.1 14.1 32.3 17.0 0.2 6.1 3.7

Housing, water, electricity and fuels 10.6 8.9 9.0 17.7 11.8 -0.9 6.1 2.2

Home furniture and maintenance 17.6 19.7 18.1 21.1 19.2 2.8 24.6 14.6

Healthcare -20.2 -15.2 3.1 5.3 -8.0 14.3 7.6 11.0

Transport -0.4 2.5 13.9 22.3 10.0 12.0 21.5 17.3

Communications 31.7 29.3 31.3 33.3 31.4 20.2 21.3 20.7

Leisure, entertainment, educationand recreation 4.8 11.4 14.1 18.5 12.6 16.5 10.0 13.2

Miscellaneous goods and services 10.1 6.7 12.4 11.9 10.4 8.4 7.9 8.2

* Consumer price indices for the corresponding commodity groups and services are used as deflators. Obtained rates are tentative, sincethese indices are not real deflators.

Source: NSI.


SHARE OF FINAL CONSUMPTION COMPONENTS IN GDP GROWTH

Source: NSI.

According to the NSI survey on investmentin industry, conducted in April 2003, companiesexpressed their intention to slow down the rateof investment in subsequent quarters probablyowing to uncertainty about global economicconditions reflecting the Iraq crisis. Private in-dustrial companies envisaged contractions ofinvestment spending by 25%. However, in theperiod following the survey growth rates of in-vestment goods imports indirectly indicate en-hanced investment.

Data on GDP for the first quarter, publishedin June 2003, was disappointing compared tothe optimistic preliminary indicators: economicgrowth of just 3.8% was reported. Domesticconsumer and investment demand was nothigh, judging by current information, but thisbrought about a rise in imports and worsenedthe foreign trade balance for the first quarterand the first six months of 2003, adversely af-fecting economic growth. Data on GDP for the

REAL CHANGE IN FINAL CONSUMPTION COMPONENTS(%, on corresponding period of previous year)

2003

Components I quarter II quarter January–Junerate share rate share rate share

Gross domestic product 3.8 3.8 4.4 4.4 4.1 4.1

Final demand 5.9 5.3 7.1 6.2 6.5 5.7

Individual 7.1 5.7 7.3 5.7 7.2 5.6

Collective -4.0 -0.4 5.7 0.6 1.0 0.1

Gross capital formation in fixed capital 15.8 2.4 19.6 3.2 18.0 2.7

Inventories change -2.6 -0.6 -1.5

Foreign trade balance -1.3 -4.5 -2.9

Exports of goods and services 13.6 6.8 11.7 6.0 12.6 6.1

Imports of goods and services 13.9 -8.1 18.4 -10.5 16.3 -9.0

Source: NSI, BNB.


second quarter of 2003 confirm boosted domes-tic demand. Individual consumption remainedthe main growth driver posting a 7.3% rise inreal terms, and investment demand consider-ably increased its real rate from 15.8% in thefirst quarter to 19.6% in the second quarter. Thefaster increase in imported goods and servicesaffected adversely the overall GDP growth(4.4% for the second quarter and 4.1% for the

first six months of 2003 on the correspondingperiod of the previous year).

In the processing industry value addedgrowth rate was high in the second quarter,matching current information by month. Theservices sector growth reported a slowdown inthe first quarter and a slight increase in the sec-ond quarter. Growth was affected adversely byagriculture.

REAL CHANGE IN VALUE ADDED BY SECTOR(%, on corresponding period of previous year)

2003

Sector I quarter II quarter January–June

rate share rate share rate share

Agriculture and forestry -1.8 -0.1 0.1 0.0 -0.7 -0.1

Industry 6.6 2.1 6.8 2.0 6.7 2.1

Processing industry 8.1 1.5 13.4 2.5 10.9 2.0

Services 3.3 2.0 3.8 2.3 3.6 2.2

Communication 10.8 0.8 12.0 0.8 11.4 0.8

Finance 15.6 0.5 14.9 0.5 15.2 0.5

Total (base prices) 4.0 4.0 4.3 4.3 4.2 4.2

Source: NSI.

VALUE ADDED REAL GROWTH BY SECTOR

Source: NSI.


LABOR FORCE DYNAMICS

Source: NSI, NLO.

EmploymentIn the 1998–2001 period growth was accom-

panied by intensive restructuring. As a result,the number of registered employees dropped.Only in 2002 did economic growth affect em-ployment and this trend continued in the firstquarter of 2003. According to NSI labor sur-veys17 rising employment does not lead to de-creased labor efficiency.

Real salary increased by 5.5% in the first sixmonths of 2003. In sectors giving employmentto the greatest number of people – processingindustry and retail – salaries were much lowerthan those in other sectors. Real salaries in theprocessing industry rose by 2.6% on an annualbasis and this growth did not jeopardize thecompetitiveness of this export-oriented indus-try.

In 2003 unemployment began to decreasegradually reaching 13.7% by the end of the firsthalf-year, or a fall of 3.1 percentage points com-pared with the end of 2002. Over the period un-der review the total number of unemployed

17 Employment growth is probably partly attributable to the adopted requirement for registration of labor contracts.

people registered in labor agencies fell by96,100.

Announced vacancies averaged 30,700 dur-ing the review period, 54% under employmentincentive programs. Of the remaining vacan-cies, 79% were provided by the private sectorand 5% were under the Law on Employment In-centive. The employment efficiency coefficientof announced vacancies was 88%, 92% of thatunder employment incentive programs.

Differences in unemployment rate by regionstayed high (it averaged 4.3% for Sofia and32.1% for Turgovishte over the review period),but a decrease was reported throughout thecountry. The number of registered unemployedpeople for the first six months decreased mostsignificantly in Burgas (-4.9 percentage points),Dobrich (-4.8 percentage points), Razgrad (-4.4percentage points), Varna (-4.2 percentagepoints) and Kurdjali (-4 percentage points). Insome of the towns this was attributable tohigher seasonal employment, while in others –to implemented employment incentive pro-grams.


InflationInflation (on an annual basis) by June 2003

was 1.2%, while underlying inflation (based on2002 annual average prices) was -0.2%. Accu-mulated inflation over the first half of 2003 was-1.4%, i.e. deflation was reported on December2002. Compared with the corresponding peri-ods of 2002, current year’s inflation was ex-

tremely low, despite the price shocks reflectingthe administered adjustments in prices and thejump of international crude oil prices in the firstmonths of 2003. The diffusion index (38%) reg-istered a drop of nine percentage points in theshare of goods and services which indicated aprice increase during the first half of the year onan year earlier basis.

LABOR MARKET DYNAMICS(%)

Indicators2002 2003

I quarter II quarter III quarter IV quarter I quarter II quarter

Employed under labor contract

share on corresponding period of previous year 1.4 0.2 1.2 0.9 5.1 8.3

share on previous quarter -0.7 1.1 0.7 -0.2 3.4 4.2

Employed people (labor force survey)

share on corresponding period of previous year 0.3 1.8 1.1 2.9 2.1 2.7

share on previous quarter 0.8 5.7 0.1 -3.5 0.0 6.3

Real pay (deflated by CPI)

share on corresponding period of previous year 1.7 -1.7 2.0 2.6 5.5 5.4

share on previous quarter -5.6 4.8 2.9 0.8 -2.9 4.6

Source: NSI.

ANNUAL AND UNDERLYING INFLATION BETWEEN JANUARY AND JUNE

Source: NSI.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200322During the period under review the monthly

change in consumer prices reflected mainlyseasonal factors (clearly pronounced in foodprices) and administered adjustments in prices,and to a smaller extent temporary inflationaryimpulses of international fuel prices. Inflation,accumulated since early 2003, hit a high of 1.5%in April and started decreasing. Seasonality ofmovements in food prices, particularly those offruit and vegetables, impacted significantlyoverall inflation owing to the large share offood (41% of the consumer basket). Prices tendto rise in the first four months of the year and inthe review period they approached a maximumcontribution of 1% to inflation growth (in Aprilby accumulated inflation from early 2003). Byend-June their contribution to overall inflationfor the first half of 2003 was negative.

Nonfoods were the other commodity group,which posted deflation in the second quarter of2003 (-0.7%), while services maintained theirpositive contribution (0.1%).

CUMULATIVE INFLATION SINCE EARLY 2003(by consumer category)

Source: NSI.

The major adjustments in administeredprices were made in July, although they signifi-cantly impacted overall inflation in the first halfof 2003. The reported rise in administeredprices during the period under review was at-tributable to increased prices of medical goods(by 7%), water supply (by 2.5%) and telephoneservices (by 1.7%).

INFLATION RATE DYNAMICS(percentage points)

January−June 2003

Food -1.48

Nonfood -0.55

Catering 0.11

Services 0.57

Goods and services with administered prices 0.47

Underlying inflation (%) -1.84

Inflation (%) -1.36

Source: NSI.


In January 2003 excise on unleaded oil andgas oil increased and a road tax was imposedon gas. This, coupled with the rise in interna-tional crude oil prices, which started in Novem-ber 2002 and continued in 2003, was expectedto result in growing fuel prices on the domesticmarket. However, prices did not change sub-stantially and their contribution to inflationgrowth was insignificant in the first quarter andnegative between January and June 2003.

Producer prices in the domestic market didnot exert inflationary pressure on consumerprices, although their growth was significant inthe first quarter of 2003 on an annual basis,reaching 8.1% in March. Greatest growth for thereview period was reported by prices in smelt-ing and casting (by 20.1%), clothing (by 16.9%),and office and computer equipment (by 9.9%).Producer price growth in early 2003 was tempo-rary and dropped to 4.2% by June (an annualchange).

ANNUAL DYNAMICS IN CONSUMER PRICE INDEX AND PRODUCER INDEX

Source: NSI.

2.The External Sector

The Balance of PaymentsBetween January and June 2003 the balance

of payments current account balance reachedUSD -982.5 million (-5.2% of projected GDP), thetrade balance and net income contributing mostto deficit formation and deficit worsening (byUSD 598.9 million year-on-year). Trade balancedeficit between January and June 2003, worthUSD 1,023.7 million or 5.4% of projected GDP,worsened further by USD 359.3 million on ayear earlier basis. Net income balance contrib-

uted additionally to the current account deficitas a result of higher coupon payments on gov-ernment bonds effected in early 2003 and ofdividends paid in April 2003. Increased Income:debit reflected the enhanced share of foreignproperty in the Bulgarian economy. In addition,the increasing debt of the private sector andlower income from foreign assets (owing tolower interest rates in international financialmarkets) affected net income dynamics unfa-vorably.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200324BALANCE OF PAYMENTS MAJOR COMPONENTS

Source: BNB.

The surplus balance on services (USD 91.8million for the review period) entirely reflectedincreased revenue from travel in May and June.However, this surplus was lower than in theJanuary to June 2002 period (by USD 57.7 mil-lion) due to increased net expenditure on trans-port and other services.

Net current transfers were the only currentaccount component which improved (by USD53.6 million). Private transfers picked up signifi-cantly compared with the same period of theprevious year.

The reported current account deficit was fi-nanced entirely by the surplus in balance ofpayments capital and financial accounts whichreached USD 1,051.8 million. Between Januaryand June 2003 direct foreign investmentamounted to USD 511.7 million (2.7% of GDP)covering 52.1% of the current account deficit.Financial fund flow in the form of other capital,comprising the change in the net obligations ofcompanies with foreign interest and direct for-eign investors on financial, bond and tradecredits, occupied the largest share of direct for-eign investment.

Decreased forex deposits of local banksabroad, consistent with portfolio restructuringand rechanneling of funds towards investmentin higher-income domestic assets, contributedto the balance of payments financial accountsurplus.

Between January and June 2003 overall bal-ance reached USD 175.4 million, exceeding byUSD 33.4 million the reported value in the cor-responding period of 2002. Realized surplus andthe April World Bank tranche (USD 164 million)under PAL (the Programmatic Adjustment Loan)were the main sources of financing for foreignexchange reserves which rose by USD 342.1million since early-2003 (excluding valuationadjustments). Given the euro appreciationagainst the US dollar and taking into accountthe valuation adjustments, foreign exchange re-serves growth was even greater (USD 775.2 mil-lion). By end-June 2003 BNB Issue Departmentassets reached USD 5,522 million, covering5.8-months’ worth of imports of goods andnonfactor services. The year saw a slight wors-ening of this ratio on the previous year entirelyreflecting the essential growth in imports vol-ume in US dollar terms.


BALANCE OF PAYMENTS FINANCIAL INDICATORS

Source: BNB.

Foreign Trade

In the first half of 2003 exports sustainedtheir upward trend increasing by EUR 419 mil-lion on a year earlier basis (by 14.8%). Importsalso rose considerably (by EUR 658 million or17%) consistent with growing consumer and in-vestment demand at home.

Raw Material Feedstocks (41.6%) and Con-sumer Goods (35.7%) comprised the largestshare in export commodity structure. Thesecommodity groups contributed most signifi-cantly to export growth. Higher export volume(by EUR 181.5 million or 15.5%) of Raw MaterialFeedstocks reflected mainly the considerablegrowth in Cast-iron, Iron and Steel (by EUR 100.5million or 54.4 %), Nonferrous Metals (EUR 25.1million or 11.8%), Timber and Paper, Cardboard(EUR 20.4 million or 28.4%) and Textiles (EUR17.4 million or 14.7%). Reported higher exportsof Consumer Goods (by EUR 150.3 million or14.9%) were attributable to the following com-modity groups: Clothing and Footwear (by EUR98.3 million or 16.1%), Food (EUR 21.3 million or20.9%) and Furniture and Domestic Appliances(by EUR 18.4 million or 19.4%). A decline was re-ported only in exports of Drinks (by EUR 2.9 mil-lion or 7.7%) and Medical Goods and Cosmetics

(by EUR 2 million or 2.4%).Increased exports of Investment Goods (by

EUR 81 million or 21.7%) reflected the concur-rent growth in all subgroups and largely in ex-ports of Electrical Appliances (by EUR 30.5 mil-lion or 101.1%) and Spares and Equipment(by EUR 10.1 million or 12.4%).

Declined exports of Electric Power was en-tirely offset by enhanced exports of PetroleumCommodities (by EUR 62.8 million or 38.7%). Asa result, exports of Energy Commodities indi-cated a slight increase (by EUR 6.2 million or2.2%).

Raw Material Feedstocks (36%) and Invest-ment Goods (24.6%) occupied the most signifi-cant share of total imports. Both commoditygroups contributed mostly to import growth: by6.9 and 4.7 percentage points respectively.

The European Union contributed mostly toexport and import growth and had the largestshare in exports and imports (56.5% and 49.3%respectively). Exports to and imports from theBalkan countries and the CEFTA countries alsoexperienced upward trends, while exports toand imports from the CIS and the Baltic repub-lics reported declines.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200326Foreign Debt and Debt Instruments

According to preliminary data, by end-June2003 Bulgaria’s Gross Foreign Debt18 totaledUSD 12,141.9 million (64.2% of GDP19): an in-crease of USD 914.3 million (8.1%) on 2002. Byend-June gross foreign debt denominated ineuro accounted for EUR 10,624.7 million fallingby EUR 190.1 million (1.8%) on December 2002.Foreign debt payments between January andJune 2003 amounted to USD 654.8 million(3.5% of GDP)20. Disbursed new loans and de-posits accounted for USD 728.4 million. Nettransfer of funds21 between January and June2003 reached USD 73.6 million (0.4% of GDP)against a negative amount of USD -237.8 mil-lion (1.5%) in the first half of 2002.

By end-June 2003 Bulgaria’s public debtamounted to USD 8,703.6 million (46.1% ofGDP), an increase of USD 370.2 million (4.4%) onend-2002. Government foreign debt totaledUSD 8,350.9 million (44.2% of GDP), an increaseof USD 373.8 million (4.7%) on end-December2002. Private sector foreign debt accounted forUSD 3,438.3 million (18.2% of GDP), an increaseof USD 544.1 million (18.8%) on the end of 2002.Private commercial bank debt amounted toUSD 471.2 million, rising by USD 33.6 million(7.7%) compared with end-2002, attributable pri-marily to increased nonresidents’ deposits. Pri-vate nonfinancial corporation debt totaledUSD 2,967 million, an increase of USD 510.5 mil-lion (20.8%) on end-2002. Intracorporate loans in-creased by USD 179.2 million (27.2%) to reachUSD 838.6 million by end-June 2003. Other loansgrew by USD 215.8 million reaching USD 923.8million. Trade credits rose by USD 112.1 millionto reach USD 1,201.4 million by end-June 2003.

Bulgaria’s long-term debt totaled USD 9,912.9million (81.6% of total debt amount), including87.3% public sector obligations and 12.7% pri-

18 See Methodological Notes of Gross Foreign Debt Reporting published on BNB web site.19 GDP for 2002: USD 15,562.9 million; GDP for 2003: USD 18,900 million.20 Excluding payments on revolving credits.21 The difference between the total amount of disbursed loans and total amount of payments on gross foreign debt service.

SHARE OF PUBLIC AND PRIVATEFOREIGN DEBTS IN BULGARIA’S GROSS

FOREIGN DEBT

31 December 2002

Source: BNB.

30 June 2003

vate sector obligations. Long-term debt grew byUSD 524.3 million (5.6%) on 31 December 2002.As of 30 June 2003 short-term debt amounted toUSD 2,229 million (18.4%) of total debt): 97.6%private sector obligations and 2.4% public sectorobligations. Short-term debt rose by USD 390million (21.2%) compared with end-2002 duemostly to increased short-term trade credits ofreal sector private corporations (by USD 361.7million or 23.9%).

DEBT INDICATORS(%)

2002 2003

I – III I – VI I – IX I – XII I – III I – VI

Gross foreign debt/GDP 67.3 69.4 69.1 72.1 60.7 64.2

Short-term debt/Gross foreign debt 11.2 12.6 13.0 16.4 17.3 18.4

Short-term foreign debt/GDP 7.5 8.8 9.0 11.8 10.5 11.8

Short-term debt/BNB forex reserves 36.5 33.8 32.7 38.7 41.4 40.4

Source: BNB.


FOREIGN DEBT BY SECTOR

Source: BNB.

As of 30 June 2003 Bulgarian obligations de-nominated in US dollars accounted for 44.2%,in euro 43.2%, and in SDR 9.2%. Indeed, theshare of euro-denominated obligations in-creased by 5.1 percentage points on December2002 and that of USD-denominated obligationsdeclined by 4.4 percentage points.

The gross foreign debt to gross domesticproduct ratio improved, falling from 72.1% bythe close of 2002 to 64.2% by 30 June 2003. Thisis attributable to projected GDP growth for 2003in US dollars.

The short-term foreign debt to gross foreigndebt ratio changed slightly indicating an in-crease: from 16.4% by end-2002 to 18.4% by 30June 2003. This reflects mainly increased short-term trade credits of private companies from thereal sector. However, the ratio of short-term for-eign debt to GDP remained unchanged at 11.8%.

By end-June 2003 the short-term debt toBNB forex reserves ratio, indicating the abilityto provide forex reserve cover of Bulgaria’sgross short-term obligations, reached 40.4%against 38.7% by end-2002.

3.The Monetary Sector

Between January and June 2003 the mon-etary and credit aggregates continued to in-crease at high rates both in nominal and realterms. An important factor behind monetary ag-gregate developments was the progressive in-crease in borrowed funds, consistent withgrowing incomes and greater business activityas well as with strengthened confidence in thestability of the banking system. Increasedmoney supply went hand-in-hand with exten-sively rising domestic credit. Lending intensi-fied two years ago as most banks became pri-

vate and reached a high in the first half of 2003when the annual growth rate of credit aggre-gates indicated the highest values since the in-troduction of the currency board. To this end,the sustained low profitability of foreign assetsplayed an important role by prompting a reduc-tion in placements with foreign banks at the ex-pense of extensive lending in Bulgaria. Creditexpansion additionally benefited from thestable macroeconomic and financial environ-ment, enhanced demand for credit by the realeconomy, and increasing competition betweencommercial banks.


MONETARY AGGREGATES DYNAMICS

Source: BNB.

Monetary Aggregates

Between January and June 2003 broadmoney grew by BGN 547.9 million or 3.9% innominal and 5.4% in real terms. Compared withthe end of June 2002 the broad money mon-etary aggregate rose by BGN 2,350.3 million, or19.3% in nominal and 17.8% in real terms.Money supply growth during the first half of2003 was attributable both to the lev and forexcomponent. Despite the seasonal specificity of

high-liquid money dynamics, the money supplylev component went up by BGN 302.2 million(3.5%) on early 2002. The money supply forexcomponent grew by BGN 245.7 million (4.7%).On an annual basis money supply growth wasmainly attributable to the lev component whichposted an increase by BGN 1,756.5 million(24.2%). The forex component rose byBGN 593.8 million (12.1%) on an annual basis.

By the end of June high-liquid moneygrowth exceeded its early year level. BetweenJanuary and June monetary aggregate M1, in-cluding money outside banks and overnight levdeposits (including demand deposits), rose byBGN 40 million (0.7%). This increase encom-passes both components of high-liquid money:money outside banks went up by BGN 20.7 mil-

lion (0.6%), and overnight lev deposits byBGN 20 million (0.9%). The annual growth ofmonetary aggregate M1 gradually acceleratedover the review period (mostly during the sec-ond quarter): from 13.5% in December 2002 to26.8% in June 2003, reflecting greater moneydemand for transaction purposes during thefirst half of 2003.


MONEY SUPPLY STRUCTURE

June 2002

Source: BNB.

June 2003

During the first half of 2003 quasi-money, in-cluding time and savings deposits in levs andforeign currency deposits, grew by BGN 273.6million (3.4%). Despite the reported increase inall quasi-money components, forex deposits,posting a growth of BGN 194.2 million (3.8%),contributed most significantly to this growth. Ir-respective of the dramatically depreciated USdollar and sharp exchange rate fluctuations, for-eign currency deposited with banks continuedto increase. Along with clear indications ofstrengthened confidence in the banking system,the attraction of foreign currency from the pub-lic helped increase banks’ disposable funds andstrengthen financial intermediacy. Time andsavings deposits in national currency alsoadded to the increase in quasi-money though toa lower degree. Within the review period timedeposits in levs rose by BGN 38.1 million(1.7%), and savings deposits in levs, byBGN 41.3 million (4.2%). Quasi-money posted agrowth of BGN 843.3 million on an annual ba-sis: 11.3% in nominal and 10% in real terms.The annual increase in quasi-money compo-nents was as follows: foreign currency depositsgrew by BGN 509.3 million (10.7%), time depos-its in levs by BGN 210.9 million (10%) and sav-ings deposits in levs by BGN 101.6 million(15.4%).

Between January and June 2003 domesticcredit increased by BGN 473.1 million (6.2%),with claims on the government and nongovern-ment sectors characterized by divergent dynam-ics. Credit to the government sector declined byBGN 891.7 million on early 2003. Most of thisdecline was ascribable to BNB claims whichdropped in line with government debt pay-ments to the IMF (BGN 69.9 million) and the in-creased government deposit with the BNB(BGN 730.2 million). Commercial banks’ netclaims on the government also indicated a de-cline, though to a lower degree (BGN 91.6 mil-lion). Although banks continued to raise theirplacements in government securities (BGN 148million), the drop in banks’ net claims on thegovernment sector was a result of increasedgovernment funds deposited with commercialbanks (BGN 239.6 million).

Credit Aggregates

Between January and June 2003 money sup-ply growth was accompanied by an expansionof net domestic assets (by BGN 553.1 million),while net foreign assets at end-June remainedalmost unchanged from their early year level.The increase in BNB net foreign assets(BGN 613.5 million) was almost entirely offsetby the reduced foreign assets of commercialbanks (BGN 618.7 million). Sustained low inter-est rates in international financial marketsforced banks to continue converting a portionof their foreign assets into domestic claims,though at a lower rate compared with the sameperiod of 2002. Overall, commercial banks’ for-eign assets dropped by BGN 552.5 million(14.5%), including deposits with foreign finan-cial institutions (by BGN 468.1 million or 16.8%).The fall occurred primarily in the second quar-ter of 2003.


DOMESTIC CREDIT STRUCTURE

June 2002

Source: BNB.

June 2003

DOMESTIC CREDIT DYNAMICS

Source: BNB.

The trend toward a fast increase in claims onthe nongovernment sector was sustained. Be-tween January and June 2003 commercial bankclaims on the nongovernment sector went upby BGN 1,364.9 million (21.6%) and by BGN2,654.1 million (52.7%) on end-June 2002. Animportant factor behind the intensified banklending in the domestic market was the sus-tained low interest rates in international finan-cial markets, which forced commercial banks toreduce their deposits in foreign financial institu-tions and instruments. Credit expansion wasadditionally underpinned by stable domesticmacroeconomic conditions, the real sector’s en-hanced credit demand and increased competi-tion in the banking sector.

During the first six months of 2003 banks’claims on nonfinancial enterprises went up byBGN 925.5 million or 18.6%. Credit expansionincreasingly grew in respect of claims onhouseholds, which rose by BGN 404.2 million(32.6%) in the first half of 2003. Intensified lend-ing in the first half-year helped keep the annualgrowth rate of credit aggregates high. Over thereview period the annual growth rate of claimson companies accelerated from 41.6% in De-cember 2002 to 48.8% by the end of June 2003,and claims on households from 44.1% to 65.7%.

Reported growth rates of claims on the non-government sector are indicative of progres-


sively increasing lending by banks. One of themajor future challenges to be faced by thebanking sector is to increase lending furtherwhile remaining prudent to preserve the qualityof assets. Despite the lack of growth in the

MONETIZATION OF THE ECONOMY

Source: BNB.

share of nonperforming loans, it will be cru-cially important for banks to pursue a prudentlending policy in the future in order to preservethe quality of credit portfolios and banking sys-tem stability.

Scale of Monetization

Changes in the monetary and credit aggre-gates helped strengthen the trend toward fur-ther monetization of the economy. Enhancedpublic confidence in the banking system andthe expanded deposit base contributed to fur-ther increase in the broad money to GDP ratiowhich reached 40.7% by the end of June.

Significantly intensified lending reflected onthe dynamics of claims on the nongovernmentsector to GDP ratio which increased to 19.4%.Although the values of these indicators remainrelatively low, their dynamics is indicative of atrend toward further monetization of theeconomy.

Interest Rates on Commercial Bank Operations

The base interest rate set by the yield at-tained at primary auctions of three-month trea-sury bills sustained its downward trend. Afterthe base rate had reached 3.23% in January, itfell significantly in February to reach a low of2.50%. Despite the follow-up gradual upwardmovement the base rate remained relativelylow (2.89% in June).22

During the review period deposit rates sawno significant changes. Interest rates on timedeposits almost replicated the previous years’levels, with the average rate in individualmonths ranging between 3.16% and 3.28%.Concurrently, interest rates on time deposits ineuro and US dollars sustained their downwardtrend. The average interest rate on time depos-

22 Government securities market is analyzed in Chapter IV, Part 2.


BNB Issuing Policy

BANKNOTES AND COINS

Source: BNB.

31 December 2002

30 June 2003

its denominated in euro went down from 2.21%in December 2002 to 2.02% in June 2003. Inter-est rates on deposits in US dollars stayedaround 1.5%, ranging from 1.39% to 1.59% inindividual months.

The lower cost of borrowed funds andbanks’ ambitions to extend their shares of thecredit market amid enhanced competition in thebanking sector were the major reasons behindthe sustained downward trend on lending rates.This trend was clearly pronounced in loans witha term of up to one year. Though at slowerrates, the average interest rate on newly dis-bursed lev loans continued to decline, with theaverage value sliding from around 9.8% for thefirst half of 2002 to 9.54% in the first half of2003. Interest rates on short-term loans in for-eign currency also dropped: the average rate onshort-term loans in euro went down to 7.49%against 9.79% in the previous six months, andthose in US dollars to 6.77% against 7.11% inthe half-year period. A slight fall was also re-ported in the average interest rates on long-

term lev loans (from 14.05% in the previous sixmonths to 13.93%), while the interest rates onlong-term loans in foreign currency posted anincrease: the average rate on long-term loans ineuro went up to 10.51% (against 10.36% in theprevious half-year period) and that on long-term loans in US dollars to 11.75% (against10.19% for the July – December 2002 period).

The average interbank money market inter-est rate stayed relatively low and followed thecyclic moves typical of the year and individualmonths. Given the traditionally higher liquidityof banks in early year, January saw the lowestaverage interbank market rate (0.71%), followedby a gradual increase in the following months.The highest average monthly value was re-ported in April (4.43%) when the values reachedrecord highs in individual days as a result oftransfers made for tax payments. Subsequentmonths were characterized by smoother inter-bank market trading, and the interest rates onconcluded transactions declined to 1.65% inJune.

Banknotes and Coins outside BNBVaults

By the end of June 2003 banknotes andcoins outside BNB vaults reached BGN 3,618million (including BGN 3,356 million outside thebanking system): a decrease of BGN 10 millionor 0.28% on the end of 2002. Of these,banknotes (1999 issue) and coins (1999, 2000,and 2002 issues) accounted for 99.5% or BGN3,600 million, and banknotes and coins of oldissues whose term of exchange has not yet ex-pired made up 0.5% (BGN 18 million).

By the end of June 2003 banknotes andcoins in commercial bank vaults totaled BGN262 million against BGN 278 million at the endof 2002.

Dynamics of cash outside BNB vaults in2002 and in the first half of 2003 followed thetraditional demand pattern for banknotes andcoins in circulation. This dynamics reflects a de-crease in the first half-year period associatedwith payment of accumulated bills for electricityand heating, direct taxes and indirect taxescharged on physical and legal entities, and anincrease in the second half of the year, consis-tent with the summer tourist season and Christ-mas bonuses.


Denomination CompositionBy the end of June 2003 the number of

banknotes in and outside BNB vaults was 271million or BGN 4,373 million, including 191 mil-lion (BGN 3,546 million) outside BNB vaults.The average banknote in circulation was worth

18.5 levs against 17 levs at the end of 2002.As of 30 June 2003 the number of coins in

and outside BNB vaults was 478 million worthBGN 62 million, including 432 million (BGN 53million) outside the BNB. The average coin out-side the BNB was 0.12 levs against 0.11 levs atend-2002.

DENOMINATION COMPOSITION OF CIRCULATING BANKNOTES AND COINS*

* Information based on values.

Source: BNB.

BANKNOTES COINS

31 December 2002

30 June 2003

Serviced Customers and CountedBanknotes and Coins

Between January and June 2003 commercialbanks deposited with the BNB banknotes andcoins to the value of BGN 1,795 million andwithdrew BGN 1,684 million against depositedcash of BGN 2,154 million and cash withdrawnworth BGN 1,812 million in the first half of 2002.

With the commissioning of the Real-timeGross-settlement System (RINGS) on 2 June2003, the procedure for supplying commercialbanks with coins and banknotes changed. De-posit on and withdrawal of cash from a com-mercial bank account with the BNB was re-

placed by purchase and sale of cash via com-mercial banks’ and BNB RINGS settlement ac-counts.

This entailed centralization and automationof the procedure for releasing and supplyingcommercial banks with Bulgarian coins andbanknotes. As of 2 June 2003 commercialbanks’ head offices started to lodge at the BNBhead office consolidated offers for purchasingand selling banknotes and coins. These coverall cash transactions of banks’ branches with re-gional BNB cash repository centers.

In the first six months of 2003 BNB tillscounted 135 million banknotes worth


23 Ministry of Finance preliminary data.

BGN 1,661 million, and 45 million coins worthBGN 9 million, against 192 million banknotesworth BGN 2,165 million and 42 million coinsworth BGN 7 million in the first half of 2002.

Banknote and Coin Productionand Destruction

Banknotes printed between January andJune 2003 numbered 20 million worth BGN 97million, and 43 million coins worth BGN 14 mil-lion were minted. Destroyed banknotes num-bered 41 million (BGN 227 million), including2 million banknotes (BGN 10 million) of old is-

CONSOLIDATED STATE BUDGET REVENUE,JANUARY – JUNE 2002 AND 2003

2002 2003 2002 2003

nominal increase, % increase, percentage points

Revenue and grants 0.1 12.6 0.1 12.6

Tax revenue 0.1 14.8 0.0 11.3

Corporate tax 14.5 6.5 1.2 0.6

Individual income tax -32.1 2.8 -4.0 0.2

Value added tax 1.6 20.4 0.3 4.1

Excise and road tax 24.9 11.0 2.0 1.1

Customs duties and fees 0.6 21.8 0.0 0.3

Social security revenue 1.9 15.7 0.4 3.8

Other -0.5 45.7 0.0 1.1

Nontax revenue 12.4 6.7 2.4 1.5

Grants -55.3 -6.6 -2.4 -0.1

Source: MF.

sues whose term of exchange has not yet ex-pired.

Coins for CollectorsIn the first half of 2003 the BNB put the fol-

lowing commemorative coins into circulation:• ‘The 60th anniversary of the rescue of

Jewish people in Bulgaria’ – a silver coinwith a nominal value of BGN 10 and amintage of 2,000.

• ‘My sunny wonderful childhood’ − CuNi,with a nominal value of BGN 5 and amintage of 10,000.

4.The Fiscal Sector23

The Consolidated Fiscal Program

Revenue under the consolidated fiscal pro-gram over the first half of 2003 was much betterthan expected. Nominally, revenue increased by12.6% on the same period of 2002, accountingfor 51.1% of revenue planned for 2003. Totalrevenue and grants came to 44.8% of the GDPfor the first half of 2003. This increase was pri-marily a result of indirect taxes, followed by so-cial security revenue (3.8%) and nontax revenue(1.5%). Revenue generated from income tax onphysical entities and corporate tax matchedprevious year’s levels.

Good revenue performance realized from in-direct taxes reflects mostly increased imports ofgoods (16.9%) throughout the first half of 2003.Higher revenue from social security contribu-tions pertained to enhanced employment andincreased pay. The mandatory registration of la-bor contracts and minimum social security in-come by major business and occupationalgroup introduced in early 2003 also contributedto this increase. Total expenditure rose by 7.1%to reach BGN 6,206.7 million (40.7% of GDP)and accounted for 45.5% of 2003 projections.


CONSOLIDATED STATE BUDGET EXPENDITURE,JANUARY – JUNE 2002 AND 2003

2002 2003 2002 2003

nominal increase, % increase, percentage points

Expenditure -1.7 7.1 -1.7 7.1

Noninterest expenditure 1.3 7.4 1.2 6.8

Current noninterest expenditure 5.8 8.4 4.6 7.2

Current expenditure 1.9 8.0 1.7 7.5

Salaries and remuneration of employees 9.7 15.1 1.0 1.7

Social security contributions -5.2 14.8 -0.2 0.6

Overhead expenditure 1.9 3.4 0.3 0.5

Defence and security 6.7 5.0 0.6 0.5

Healthcare subsidies -7.5 -9.1 -0.3 -0.3

Interest, total -28.0 3.8 -2.9 0.3

interest on internal loans -23.7 19.6 -0.3 0.2

interest on external loans -28.6 1.5 -2.6 0.1

Social and health insurance payments 11.7 8.4 4.0 3.2

pensions 8.0 7.2 1.7 1.7

household grants and compensations 18.2 10.4 2.2 1.5

Capital expenditure -23.4 -7.1 -2.1 -0.5

Source: MF.

CONSOLIDATED STATE BUDGET PRIMARY BALANCE(noncumulative)

(share of GDP for corresponding quarter, %)

Source: BNB.


DEPOSITS OF THE GOVERNMENT AND BUDGET ORGANIZATIONS WITH THE BNB

Source: BNB.

This increase was mostly attributable to currentnoninterest expenditure which increased by 1.1percentage point and made up 35.1% of GDP.

Expenditure on salaries and social securitycontributions indicated the largest nominalgrowth, consistent with employment incentiveprograms launched in early 2003. Budget insti-tutions are the sole employer under these pro-grams. Subsidies on healthcare and medical as-sistance continued to decrease due to undertak-ing by the National Health Insurance Fund aportion of healthcare financing from municipali-ties. Increased subsidies to nonfinancial enter-prises (by BGN 61.1 million to 1.3% of GDP) sig-nal a delay in real sector restructuring. The gov-ernment continued boosting indemnificationand benefit payments to households: by end-June they accounted for 6.2% of GDP.

Expenditures on internal interest24 rose byapproximately 20%, consistent with post-2002issuing policy aimed at increasing considerablynet domestic debt issues with longer maturity.However, spending on internal interest re-mained significantly below interest expenditureon foreign debt: 0.4% against 2.5% of GDP re-spectively.

For a third consecutive year capital expendi-ture indicated a decline and accounted for 2.5%

of GDP. Lower revenue from grants under vari-ous EU programs is one of the major reasonsfor decreased capital expenditure.

With regard to functional classification mosttypes of expenditure stayed relatively stable. Inthe past two years a slight downward trend inspending on defense occurred: between Janu-ary and June 2003 this fell by 0.3 percentagepoints to 2.3% of GDP. Expenditure on educationand healthcare posted an increase which is moreclearly pronounced in the case of the latter.

Smooth performance of the revenue side re-sulted in a record high primary surplus of 7.1%of GDP in the first half of 2003. The internal bal-ance reached BGN 1,015 million or 6.6% ofGDP. Accumulated sizable surpluses under theconsolidated fiscal program indicate that itwould have been possible to reduce the tax bur-den at the end of 2002.

Financing and Government DebtSince 1998 cash surpluses on the budget

have been traditionally reported in the first halfof each year. The cash surplus in the first half of2003 reached BGN 626.4 million or 4.1% ofGDP. Foreign financing totaled BGN 229.2 mil-lion (1.5% of GDP). Revenue from privatizationamounted to BGN 113.8 million (0.7% of GDP),

24 Expenditures on debt service to the BNB are reported under interest expenditure on foreign debt and foreign financing.


25 The consolidated government debt includes central government debt, municipal debt and social security fund debt. Itdoes not include the debt guaranteed by the government and municipalities. This indicator would repay greater attentioninsofar as it is used for evaluation of the debt to GDP ratio according to the European Economic Monetary Union acces-sion criteria. The government debt concept is defined in Chapter Two of the Law on the Government Debt.

26 The difference in foreign government debt data provided by the MF and the BNB reflects differences in methodology ofstatistical reporting, i.e. in the scope and application of the residence principle.

and internal financing was negative: BGN -969.5million (-6.4% of GDP). The second quarter of2003 saw a significant increase (by BGN 1,050.5million) in deposits and funds on accounts typi-cal of recent years. As a result of an extraordi-nary issue of treasury bonds in the first quarterof 2003 (worth EUR 105 million), the net issue ofgovernment securities in the first half of 2003was positive and came to BGN 161.9 million.The average maturity of outstanding issuescontinued to increase from early 2003: from53.08 to 62.18 months.

By mid-2003 consolidated government debt25

totaled BGN 16,682.3 million (47.3% of GDP pro-jections for 2003). Domestic debt grew byBGN 115.8 million to reach BGN 2,269.8 million

GOVERNMENT SECURITIES NET ISSUE*

Source: MF.

* (-) means injection of liquidity.

(6.4% of GDP). The lev equivalent of foreigngovernment debt26 decreased by BGN 500 mil-lion to BGN 14,412.5 million (40.8% of GDP).This fall reflects mostly the 10% depreciation ofthe US dollar against the euro.

The devaluated US dollar and the extraordi-nary issue of EUR-denominated bonds were themain reasons behind the 3.7 percentage pointincrease in the share of government and gov-ernment guaranteed debts denominated in eurowhich reached 32.1%. The share of debt de-nominated in US dollars fell from 49.8% to46.2%. The interest rate structure of debt re-mained almost unchanged: by mid-2003 fixed-interest debt decreased by 0.7 percentagepoints to 58.4%.


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III.

Foreign ExchangeReserve Management


1.Amount and Dynamics of Foreign Exchange Assets

Between January and June 2003 foreign ex-change assets measured by the Issue Depart-ment balance sheet figure exceeded EUR 4.5billion, continuing their steady upward trend ofthe last few years. Average foreign exchange

reserves increased by EUR 687 million com-pared with the same period of 2002. Averagesof selected indicators from the Issue Depart-ment balance sheet for the last four and a halfyears are shown in the table below.

During the period under review gross for-eign exchange reserves reached their lowestlevel (EUR 4,263 million) in mid-February andhit a record high (EUR 4,845 million) at the endof June. Foreign exchange reserves betweenJanuary and June rose by EUR 263 million, in-cluding net cash inflows of EUR 215 million andmarket and foreign currency revaluations ofEUR 48 million. Issue Department assets and li-abilities management resulted in a net incomeof EUR 68.72 million.

External flows contributing to substantialchanges in foreign exchange assets included:

a) flows directed toward increasing foreignexchange assets:

• new loans drawn – EUR 150 million re-ceived from the World Bank, SDR 52 mil-lion from the IMF and USD 11 million;

• revenue from government securities is-sues denominated in euro: EUR 105 mil-lion;

SELECTED INDICATORS* OF THE ISSUE DEPARTMENT BALANCE SHEET(million EUR)

1999 2000 2001 2002 I−VI.2003

Foreign exchange reserves 2659 3277 3568 4086 4516

Net value (Banking Department deposit) 416 447 500 567 666

Government deposits and accounts 1058 1352 1264 1430 1647

Bank deposits and current accounts 294 326 314 361 380

Banknotes and coins in circulation 887 1075 1330 1616 1764

* Average values.

Source: BNB.

• revenue from net purchases of reservecurrency by commercial banks totalingEUR 44 million;

• revenue from net purchases of reservecurrency in cash amounting to EUR 38million;

• net revenue on commercial banks’ ac-counts with the BNB in compliance withthe regulation of minimum required re-serves: net deposited EUR 43 million,CHF 94 million and USD 14 million;

• received funds on Russia’s debt to Bul-garia worth EUR 32 million;

• exported and sold Bulgarian banknotes ofEUR 6 million to foreign banks;

b) flows directed toward decreasing foreignexchange assets:

• Ministry of Finance payments on foreigndebt service worth USD 164 million,SDR 43 million, EUR 127 million andJPY 2.2 billion;


FOREIGN EXCHANGE ASSETS(million EUR)

Source: BNB.

BANKING DEPARTMENT DEPOSIT(million EUR)

Source: BNB.

• SDR 16 million repayments on the BNBdebt to the IMF.

Over the review period the net value (Bank-ing Department deposit) decreased most sig-nificantly in April (EUR 619 million) due to thecontribution to the state budget of BNB’s ex-

cess of revenue over expenditure for 2002. Thiscame to BGN 133 million. The maximum valuefor the January to June 2003 period (EUR 703million) was reached in the beginning of Marchmostly as a result of investment activities onforeign exchange reserve management.

2.Management Strategy for BNB

International Foreign Exchange Reserves

Objectives and Principles of BNBInvestment Policy

Major investment objectives in foreign ex-change reserve management are defined in theLaw on the BNB. They are achieved throughpursuing minimum net values of Issue Depart-ment balance sheet assets with one-month andone-year horizons which ensure the requiredrisk cover in the event of a system liquidity cri-sis. This minimum value is determined quar-terly on the basis of fresh data on banking sys-tem status and prospects.

BNB foreign exchange reserves are split intoportfolios. According to additionally defined in-vestment objectives, three basic portfolios maybe distinguished: an investment portfolio de-nominated in euro, a liquidity portfolio denomi-nated in euro, and a liquidity portfolio denomi-nated in US dollars.

The investment objective of the EUR-de-nominated investment portfolio is to maximizeexpected income over one-year period coupledwith an additional constraint which envisages a

negative income risk of maximum 5% at end-horizon.

The investment objective of the EUR-de-nominated liquidity portfolio is to ensure liquid-ity for all expected BNB obligations, includingthe sale of euro against levs at all times withoutany limit.

Choosing adequate benchmarks for each in-dividual portfolio was essential for asset strate-gic restructuring process. The benchmark is aportfolio which expresses investors’ prefer-ences as to expected income to risk ratio. Thebenchmark consists of market indices coveringparticular maturity sectors of the governmentbond market. These benchmark sectors areweighted so as to maximize the expected in-come given certain investment constraints forasset classes and the additional risk constraint:the benchmark profitability on an annual basisshould not be negative with a 95% probability.

Eligible asset classes in which the BNB mayinvest are assigned a minimum AA- or higherrating by at least two of the three internationallyrecognized agencies: Moody’s, Standard &

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200342Poors, and Fitch Ratings. During the review pe-riod over 66% (on average) of funds were in-vested in assets with the highest credit ratingAAA.

According to investment constraints on for-eign exchange reserve management, the shareof investment in commercial banks, i.e. BNB ex-posure, must not exceed 30% of total assetamount. Over the review period Bank exposure

averaged 19.3% of the total asset amount.Open foreign currency positions to the Issue

Department balance sheet net value are used asa major measure of foreign currency risk. TheForeign Currency Imbalance Table shows thatthe presence of gold in BNB assets poses thegreatest foreign currency risk for the Bank (55%on an annual basis).

FOREIGN CURRENCY IMBALANCE

CHF GBP JPY SDR USD XAU

Foreign currency imbalance as a shareof the net value (%) -0.14 0.01 0.00 6.53 0.08 54.59

EUR (million) -1.01 0.07 0.02 48.58 0.62 406.18

Source: BNB.

Positioning of the InvestmentPortfolio in Euro

In the first half of 2003 amid high geopoliti-cal risk (Iraq, the Middle East), high volatility offinancial markets and contradictory signals onthe performance of the US and eurozoneeconomies, the European Central Bank reducedthe repo interest rate in March and June from2.75% to 2%. Eurozone government securitiesyield fell by 50 basis points on average in allmaturity sectors. The most significant changesoccurred in the two-year sector: a decrease of70 basis points on average. The yield curveslope measured by the difference between ten-and two-year sector yields steepened (a risefrom 154 to 168 basis points) prompting a typi-cal, under such circumstances, contraction inswap spreads, most clearly pronounced in thethree- to four-year sector (by approximately 20basis points).

According to the passive strategy for EUR in-vestment portfolio management adopted in thefirst half of 2003, the average duration27 wasmaintained neutral to that of the benchmarkboth in the first and second quarters. GivenBank expectations of swap spread contractionamid low interest rates and a steep yield curve,a portion of portfolio funds was invested in, be-sides government securities, agency debt andin Jumbo Pfandbrief mortgage bonds. Some ofthe positions in spread securities were closedfollowing their relative appreciation and attrac-tive profit levels attained.

Positioning of the Liquidity Portfolioin Euro

In accordance with adopted strategies for thefirst two quarters, liquidity portfolio duration ineuro was maintained close to that of the bench-mark. Slight deviations occurred in the periodsof purchases (in January) and sales of reservecurrency (especially in April) by commercialbanks and foreign debt payments. The main ob-jective of maintaining a neutral duration waslimiting the assumed interest rate risk amidhigh political and economic uncertainty.

In the first quarter of 2003 income was hitby maintaining a higher weight of German se-curities exposure and lower weights of expo-sures in Greek, Spanish, Finnish and Italian se-curities compared with those in the benchmark.In the second quarter this factor had a slightereffect due to compensation of gains by lossesfrom long and short positions by individualcountry. To earn higher returns, investments inspread securities were made (debt of suprana-tional institutions and government guaranteedagencies), as well as in underestimated sectorsof the yield curve. In most months of the half-year period the yield curve had a falling slope inthe one-year sector and a steep upward slope inthe two- to three-year sector. The use of yieldcurve asymmetrical shape and the barbell strat-egy28 was one of the reasons behind higherrates of return with greater volatility of the port-folio to the benchmark.

27 The interest risk and the spread risk in foreign exchange reserve management are measured by a modified and a spreadduration respectively.

28 A barbell strategy involves bond replication associated with a simultaneous purchase of securities with short- and long-term maturities.


Positioning of the Liquidity Portfolioin US Dollars

The macroeconomic situation in the USA,Federal Reserve policy, and the Iraq conflictwere the major factors affecting the bond mar-ket in the first half of 2003. In early 2003 mar-kets were quite volatile due mostly to specula-tions on when the Iraq war would start and howlong it would last and associated uncertainty.The prospects of an upsurge in the USeconomy affected the transfer of funds betweenthe debt and stock exchange markets. In thesecond quarter further reduction in Federal Re-serve interest rates was expected and June sawa fall of 25 basis points.

In early 2003 lower income in all curve seg-ments and corresponding price rises were ex-pected. Portfolio duration in the first months ofthe year was maintained slightly longer than

that of the benchmark with isolated cases ofmore significant deviations directed at usingopportunities in the market and taking long po-sitions which were closed later to earn highprofits. January’s large outflows associatedwith foreign debt payments were met by gov-ernment securities sales, primarily spread prod-ucts. During the Iraq conflict, amid a weakermarket, and given expected forex reserve dy-namics, long positions were taken, thus realiz-ing higher returns than the benchmark despitethe subsequent sales at the end of the war. Inthe second quarter an active position was takenby maintaining the portfolio duration longerthan that of the benchmark in anticipation ofdecreased profitability. During the review pe-riod a portion of spread securities was pur-chased and some positions were meanwhileclosed due to attainment of profitable levels forsale.

3.Structure of International Foreign Exchange Assets

Structure by Currency and FinancialInstrument

In the period under review assets in euro,SDR and Swiss franks increased owing to dis-bursed loans in euro and SDR (the World Bankand IMF), as well as to increased funds in Swissfranks on commercial banks’ minimum required

reserve accounts with the BNB. The share of as-sets in US dollars declined following paymentson foreign debt. The decreased share of assetsin gold was due to an increased absolute vol-ume of all assets over the review period.Monthly average currency structure data of allassets based on the trade date is presented inthe table below.

CURRENCY STRUCTURE OF ASSETS(%)

January February March April May June

EUR 81.13 81.66 81.76 80.42 81.98 82.37

USD 7.89 6.29 6.79 7.87 6.72 6.57

XAU 9.56 9.68 9.11 8.47 8.28 8.06

SDR 0.97 1.40 1.38 1.74 1.81 1.52

CHF 0.45 0.93 0.95 1.49 1.21 1.46

GBP 0.00 0.00 0.00 0.01 0.00 0.00

JPY 0.00 0.03 0.02 0.00 0.00 0.01

Source: BNB.

In the first half of 2003 the major part of theliabilities (totaling about 90%) in the BNB Issue

Department’s balance sheet was denominatedin Bulgarian levs and euro.


The monthly average financial instrumentstructure of all Issue Department balance sheetassets at their market value based on the trade

CURRENCY STRUCTURE OF LIABILITIES(%)


BGN 75.32 76.27 74.94 72.56 72.17 72.74

EUR 14.65 14.49 15.09 15.31 17.89 17.41

USD 9.47 7.64 8.19 9.37 7.90 7.72

CHF 0.56 1.16 1.17 1.80 1.46 1.74

SDR 0.00 0.44 0.61 0.96 0.58 0.39

Source: BNB.

date is displayed in a separate table. BetweenJanuary and June 2003 the BNB internationalforex assets structure by financial instrumentmoved within a relatively narrow range.

STRUCTURE OF FOREX ASSETS BY FINANCIAL INSTRUMENT(%)


Cash* 5.01 4.74 5.91 5.13 5.26 6.05

Deposits** 12.49 12.76 12.62 15.76 14.09 13.90

Securities** 78.67 78.62 77.83 75.72 77.34 76.82

Gold in vaults 3.83 3.88 3.64 3.39 3.31 3.23

* Financial instruments with a maturity of up to three days.** Instruments in foreign currency and in gold are included.

Source: BNB.

Structure of Forex Assets by Maturity(Residual Term to Maturity)

The share of instruments with a residualterm to maturity of up to one year (current ac-counts, short-term deposits in foreign currencyand gold, and short-term government securi-ties) declined insignificantly throughout the pe-riod under review: from 43.63% in January to

42.31% by end-June. This reflects to a great ex-tent foreign debt payments in liquid funds inearly 2003. The share of investment with a re-sidual term to maturity of over three years roseby approximately 1.5%, attributable mainly to atransfer of funds from the liquidity portfolio tothe investment portfolio and their investing inlonger-term assets.

MATURITY STRUCTURE(%)

Sectors January February March April May June

up to 1 year 43.63 41.55 42.42 44.49 41.49 42.31

from 1 to 3 years 20.11 21.17 20.46 19.16 20.77 20.04

from 3 to 5 years 16.73 16.67 16.36 16.68 18.32 17.41

from 5 to 10 years 19.53 20.62 20.76 19.67 19.43 20.25

Source: BNB.


29 This is the Banking Department Deposit item of the Issue Department balance sheet.30 Income is not considered in accounting but in financial context, i.e. the balance between market values of assets at the

end and at the beginning of the period less cumulative net forex flow.31 The Sharpe’s ratio is a measure of expected extra return over the risk-free return per unit of assumed risk.32 The so-called tracking error.

4.Efficiency of Forex Reserve Management

The net value29 of the Issue Department bal-ance sheet is the major guarantee of currencyboard stability. Changes resulting from marketrisk factors (interest rate and foreign currencyrisks) pertain to:

• income from assets;• imbalance between the foreign currency

structures of assets and liabilities;• expenditure on liabilities.

INCOME FROM ASSETS30

* Share of a particular portfolio in the profitability in terms of the balance sheet.

Source: BNB.

Income from assets by portfolio

Incomefrom assets

(total)

(1)

Income fromasset and

liabilityforex

imbalance

(2)

Expendi-ture

(interest)on

liabilities

(3)

Profitabilityof the net

valueBase currency EUR EUR EUR EUR USD XAU

Average weight (%) 51 19 7 5 7 9

Average amount(million) 2335 870 300 241 323 406

Income (million) 85.91 12.38 9.12 7.33 2.29 1.19 118.22 -35.25 -14.26 68.729.24

Share* (%) 1.87 0.27 0.20 0.16 0.05 0.03 2.57 -0.77 -0.31 1.49

Profit(Loss)

(1)+(2)+(3)

Investmentportfolio

Liquidityportfolio

Externalmanager А

Liquidityportfolio

Externalmanager В

In gold

Between January and June 2003 interest ratelevels both in the US and European governmentsecurities markets went down, most signifi-cantly in the eurozone where over 80% of forexreserves was invested. Interest rate decline re-sulted in a profitability of 2.57% for the assetswhich in absolute terms equal EUR 118 millionwith an average modified duration of 2.19. Theeffect of the imbalance between the foreign cur-rency structures of assets and liabilities led to aresult of EUR -35.25 million due mostly to thelong open position in gold (8.84% of all assets).Simultaneously, gold value in euro fell by 7.94%(see Chart on page 46). Expenditure on liabili-ties (interest paid and accrued in the review pe-riod) totaled EUR 14.26 million.

As a result of the interaction of the abovethree components net income (correspondinglythe increase of the net value) in the review pe-

riod was EUR 68.72 million, equal to total netprofitability of 9.24%.

Sharpe’s ratio31 is used as a management ef-ficiency criterion for individual portfolios. It al-lows for correct comparison of a particular port-folio with its benchmark, taking into accountnot only the expected return but also the degreeof assumed risk. The information coefficient isanother criterion for the efficiency of activemanagement used for comparison of portfolios.The relative risk32 to the benchmark is an indi-cator of the degree of the portfolios’ activemanagement. The relative risk reflects the op-portunity for total portfolio profitability to belower than the benchmark (i.e. for relative prof-itability to be negative). If the relative profitabil-ity is negative, it will be interpreted as a loss ofprofit in portfolio management. The positiverelative return is a profit in respect of bench-mark profitability.


RISK AND PROFITABILITY OF INDIVIDUAL PORTFOLIOS,JANUARY–JUNE 2003

Source: BNB.

Portfolio

Portfoliobase cur-

rency Portfolio(%)

Benchmark(%)

Relative prof-itability (basis

points)

Profitability Volatility (risk)

Portfolio Benchmark

Sharpe’s ratio Grossinformationcoefficient

Portfolio(%)

Benchmark(%)

Relativerisk (basis

points)

Investment EUR 3.71 3.66 5 2.34 2.38 61 1.59 1.55 0.10

Liquidity EUR 1.44 1.39 5 0.14 0.12 7 4.49 4.84 1.00

Liquidity USD 0.74 0.65 9 0.18 0.10 14 2.40 2.98 0.90

In gold XAU 0.49 0.00 49 0.60 0.00 60 - - 1.12

External manager А EUR 3.01 2.96 5 1.60 1.58 39 2.27 2.25 0.18

External manager В EUR 3.07 2.94 13 1.63 1.54 25 2.27 2.28 0.27

YIELD TO MATURITY OF GOVERNMENTSECURITIES IN EURO

(%)

Source: Bloomberg.

GOLD PRICE DYNAMICS IN EURO(EUR)

Source: Reuters.

YIELD TO MATURITY OF GOVERNMENTSECURITIES IN US DOLLARS

(%)

Source: Bloomberg.

USD PRICE DYNAMICS IN EURO(EUR)

Source: Reuters.

47LiqLiqLiqLiqLiquiuiuiuiuidididididity aty aty aty aty annnnnd Finad Finad Finad Finad Finannnnnccccciiiiial Maral Maral Maral Maral Markkkkketsetsetsetsets

IV.

Liquidity andFinancial Markets


1.Liquidity

During the first six months of 2003 bank re-serves continued to grow reflecting the gradualincrease in attracted funds. Overall reserves ofthe banking system in the review period weresufficient to ensure minimum required reservemaintenance and smooth settlements. Highbanking system liquidity prompted low interestrates on the interbank money market and adominant position of overnight deposits in theterm structure of concluded transactions.

Lev bank reserves varied within individualmonths, despite the high values of the periodas a whole. Typically high lev liquidity resultedin low interbank money market interest rates inearly 2003, while its decrease in subsequentmonths prompted a gradual increase in moneymarket price of lev funds. As usual, liquidityand interest rate fluctuations in the interbankmarket within individual months were causedby cash flows between the banking system andthe MF. Tension occurred in the interbankmoney market only in April, when deficient freefunds in the market contributed to a dramaticrise in interest rates on interbank deposits. Thelikelihood of such liquidity crises in the future isinsignificant: since as of early June commercialbanks were allowed to credit their reserve ac-counts in euro in the BNB with current valuedate.

The Interbank Money MarketIn the first half of 2003 the volume of term

transactions on the interbank money marketposted a minimum decrease of BGN328,349,000 (3.09%) on the same period in 2002reflecting a decrease of BGN 786,201,000(8.08%) in lev deposits. The other segments re-ported increased volumes as follows: repoagreements by BGN 280,754,000 (81.19%) andoutright transactions in government securitiesby BGN 177,098,000 (31.1%). The dramatic rise

(of 11.42%) was reported by foreign currencydeposits, particularly those in US dollars, euroand British pounds. This reflects the opportu-nity provided to commercial banks as of 1 June2003 to credit their reserve accounts in eurofrom their accounts in foreign countries withspot value date (and correspondingly to sellthem to the BNB), which facilitates lev liquiditymanagement.

No significant changes occurred in pastyear’s ratios within the market structure by typeof transaction: deposits dominated despite theslight downward trend, 86.84% (against 91.54%in the same period of the previous year), fol-lowed by outright transactions in governmentsecurities, 7.08% (against 5.19% in the same pe-riod of the previous year) and repo agreements,6.08% (against 3.25% in 2002).

The share of secured deposits in total inter-bank deposits dramatically decreased to just0.84% (against 2.85% in the same period of theprevious year).

The volume of commercial banks’ outrighttransactions in government securities issued inBulgaria increased by 31.2% on the same periodof the previous year, posting an increase of31.2% in volume of traded lev issues and a four-fold rise in EUR-denominated government se-curities. Outright transactions in USD-denomi-nated government securities decreased bysome 0.18%.

High banking system liquidity reflects thesustained ratios within the interbank marketstructure by term of transaction. Overnighttransactions had the largest share, 70.79%, fol-lowed by two to three-day transactions, 18%(71.73% and 19.33% respectively in 2002).

The average interest rate on interbankmoney market transactions reached 1.86% inthe first half of 2003 (against 2.17% in 2002),staying below the average base interest rate


INTERBANK MONEY MARKET, JANUARY – JUNE 2003

Source: BNB.

INTERBANK MONEY MARKET AND EXCESS RESERVES, JANUARY – JUNE 2003

Source: BNB.

level of 2.78% (4.26% in the previous year). Theaverage interbank interest rates, formed by de-mand and supply, varied widely in individualmonths: from 0.72% in January to 4.64% inApril. Major factors responsible for the forma-

tion of market and interest rate terms in the firstsix months continued to be MF fiscal operationsand developments in international forex mar-kets. The low interest rates in early 2003 re-sulted from enhanced liquidity due to relatively


BASE INTEREST RATE AND INTERBANK INTEREST RATE, JANUARY – JUNE 2003

Source: BNB.

The SOFIBOR and SOFIBID IndicesAt 11 am on 7 February 2003 Bulgaria wit-

nessed the first fixing of a SOFIBOR (Sofia inter-bank offered rate) price at which deposits areoffered in the interbank market. Indices wereformulated at the initiative of commercial bankswith BNB methodological assistance and Minis-try of Finance support. Their daily calculation isbased on a sponsorship agreement betweenthe BNB, the Association of Commercial Banks,and the Bulgarian Dealers’ Association,whereby Indices Terms and Procedures wereapproved, a Regulation Indices Committee com-prising sponsors’ nominees was formed at theAssociation of Commercial Banks, and distribu-tion of indices (quotations’ adoption and indi-ces’ calculation and publication) was assumedby the BNB.

SOFIBOR is fixed for five terms: overnight,one-week, one, two and three-month interest

rate indices, reported by 12 commercial bankswho are voluntary participants in the fixing,posting some 65% of interbank market turn-over. SOFIBOR is an arithmetical mean of quo-tation (highest and lowest quintiles excluded) ofeach term. Since the fixing formulation rests onbanks reporting quotations, announcing theprice at which they offer deposits, i.e. their offerprice, SOFIBID (the Sofia interbank bid rate), anindex of a bid price for the corresponding term,was formulated to match any SOFIBOR index.

In the first months following the fixing of in-dices, a number of commercial banks includedthem in the price formula of credits extended tocorporate clients. There is a possibility of apply-ing these indices to the evaluation of commer-cial banks’ liabilities. Index definition, regula-tions and values can be found in the FinancialMarkets page of the BNB’s web site.

high interest and partial principal payments bythe MF on ZUNK bonds denominated in US dol-lars. The high interest rate of 4.64%, reached inApril (against 2.57% average base rate for themonth), was attributable to decreased liquidityowing to inflexible liquidity management in in-dividual banks. This predetermined the tension

in the interbank money market. The moneymarket calmed down following the two one-dayrepo auctions (with approved competitive bidsof BGN 25 million and BGN 18.85 million re-spectively) held by the MF. Fluctuations werestronger within individual months, mainly re-flecting fiscal cash flow dynamics.


SOFIBOR OVERNIGHT AND THREE-MONTH FIXING

Source: Bulgarian Stock Exchange – Sofia.

Commercial Bank ReservesIn the first half of 2003, banks’ attracted

funds gradually increased, posting a 20.26%growth for lev deposits and a 6.21% growth forlev equivalent of foreign currency depositscompared with average values reported in 2002.Given the 14% appreciation of the lev againstthe US dollar, growth of foreign currency liabili-ties in absolute terms was some 13%. In any in-dividual month of the period under review de-posit base dynamics matched the change inbanks’ liabilities curve of previous years de-pending on the economy’s seasonal needs.

In the review period the share of minimumrequired reserves remained unchanged at 8% ofthe deposit base.

Banking system liquidity stayed high overthe first six months of 2003. Average daily ex-cess reserves rose by some 30% on thosereached during 2002 as a whole. In the firstquarter funds on banks’ settlement accountsensured normal payments, with not one dayseeing a necessary for minimum required re-serve maintenance, or of foreign currency cashsales with current value date. In April on daysset for tax payment by the MF, the cash outflowfrom the banking system to the MF provedhigher than expected by the banks and theywere unable to provide the liquidity needed tomeet payments. One of the reasons was the

fact that their reserve assets in euro were under1% of total reserves with the BNB. Deficiency offree funds prompted a dramatic increase in in-terbank deposit interest rates. The MF inter-vened to ease the tension providing the neces-sary liquidity by one-day repo operations con-ducted with four banks. To avoid such short-term liquidity crises, at the request of commer-cial banks on 1 June the BNB gave its consentfor banks to credit reserve accounts in euro atthe BNB with current value date.

Foreign exchange maintained as reserve as-sets varied widely over the period under review,comprising between 17.72% of required re-serves on attracted funds in January and54.55% in April. Strong fluctuations reflectedserious differences in banking system lev li-quidity owing mostly to the clearly pronouncedseasonality of fiscal cash flows. Foreign ex-change reserve assets structure by currency ismainly influenced by developments in interna-tional markets. During the first half of 2003 theUS dollar prevailed, followed by the Swissfranc.

It should be noted that two-thirds of the av-erage banking system excess reserves main-tained in the period, were reported by a singlecommercial bank. This predetermined the rela-tively stable high volume of interbank markettransactions conducted by other banks for pro-viding daily liquidity. Prices of traded funds


AVERAGE ANNUAL YIELD OF GOVERNMENT SECURITIES AT ISSUE

Source: BNB.

were around and under the base interest rate.In the first half of the year only one bank

faced some difficulties in maintaining monthlyaverage minimum required reserves (the case

was reported in May) and only six banks usedon several occasions more than 50% of mini-mum reserves, required for the day; the latterwere sanctioned under the established proce-dure.

2.The Financial Markets

The Government Securities Market

The Primary MarketIn 2003 the issue calendar of the Ministry of

Finance matched the previous year’s term struc-ture: three-month and one-year discount gov-ernment securities, and three, five, seven andten-year government securities with fixed inter-est. All issues with fixed interest were tap gov-ernment securities (effected in tranches throughindividual auctions). The value of three-month,one-year and three-year issues stayed atBGN 12 million, BGN 20 million and BGN 50million respectively, while ten and seven-yearissues amounted to BGN 75 million each (theywere revised downward and upward respec-tively). The value of the ten-year issue was de-creased to BGN 50 million.

The greatest part by volume of each issuewas concentrated in the first month of eachquarter. In 2003 auction dates of three-monthbonds, setting the base rate, was moved fromthe beginning to the end of each month.

Other changes occurred in the issue calen-dar as well. The seven-year government securi-ties issue set to be launched in the first sixmonths of 2003 was merged with the oneplanned for the second half of the year; the is-sue value and the auction number werechanged. Unlike the previous year, there was noBGN-denominated seven-year-and-three-monthissue. The EUR-denominated seven-year-and-three-month issue was launched in February


and securities amounting to EUR 105 millionnominal value were placed in two tranches.

Average annual yield at issue for all termswas lower compared to the corresponding pe-riod of 2002. The base interest rate attained atthe auctions of three-month securities de-creased to 2.5% in early 2003, reached 3% inApril and May, and moved back to the samelevel of 2.5% by the end of the review period.

To ease the tension on interbank moneymarket in mid-April the MF held auctions forbanks which are primary dealers in one-dayrepo agreements on two consecutive days. Thefirst, for securities of BGN 25 million, closedwith an average annual yield of 11.6%. The sec-ond, for securities comprising BGN 18.65 mil-lion, closed with an average annual yield of2.63%.

Buybacks of portions of five-year governmentsecurities issues maturing in October 2005 andJanuary 2006 by repayment of the nominal valueand interest were effected in late April, and bytheir replacement by the January 2003 three-yearissue maturing in January 2006. A month laterfollowed a buyback of new portions of the sametwo issues and of a portion of another five-yearissue maturing in April 2006. An auction for abuyback of a portion of the ten-year January2003 issue maturing in 2013 by repayment washeld in June, but no bids were approved.

Subscriptions for the conversion of 25-yearUSD-denominated ZUNK bonds maturing on1 January 2019 into 20-year EUR-denominatedgovernment securities with the same status andmaturity were held in January and May (no bidswere received for the latter).

As in the first half of the previous year, themonthly amount of savings treasury bonds soldto individuals usually moved between BGN 1million and BGN 1.5 million, and doubled inJanuary. However, the trend of monthly repay-ments exceeding new issues was gradually re-versed.

The Secondary MarketOutright commercial bank transactions in

government securities issued in Bulgaria (in-cluding transactions by investment intermediar-ies approved as primary dealers) rose by 32.7%on a year earlier. The volume of lev-denomi-nated bonds went up by 31.2%, while the vol-ume of foreign currency bonds (US dollarZUNK bonds and analogous euro bonds, aswell as the new EUR-denominated issue) exhib-ited a 69.8% growth.

Over the review period yield curves in Bul-garia and the eurozone moved downward, theconvergence of the two yield curves’ shape re-maining almost unchanged as regards their po-sitions and direction.

YIELD CURVES OF GOVERNMENT SECURITIES IN BULGARIAAND EUROZONE AS OF 30 JUNE 2003

Source: BNB.


The price of US-denominated ZUNK bondsreached USD 85 per USD 100 nominal value byend-January, staying below this value untilJune.

Bulgarian Brady bonds and global bondsmoved mostly upward underpinned by up-graded credit ratings in May and June. On 22May Standard & Poor’s Ratings Services up-graded Bulgaria’s long-term foreign currencycredit rating from BB to BB+, one grade belowthe investment rating. The short-term foreigncurrency credit rating stayed at B. The long-term national currency credit rating was raisedfrom BB+ to BBB–, the lowest investment ratefor long-term credit. The short-term nationalcurrency credit rating was raised from B to A3,the lowest investment rate for short-term credit.The rating outlook was defined as stable. On5 June Moody’s Investors Service raised theceilings on Bulgaria’s foreign currency denomi-nated bonds from B1 to Ba2, two grades belowthe investment rating (which is equal to Fitch’sBB and is one grade below Standard & Poor’sBB+), and for foreign currency bank depositsfrom B2 to Ba3. Government rating for bonds inforeign and national currency rose to Ba2. Therating outlook was defined as stable. (On thefollowing day Moody’s upgraded the foreigncurrency long-term deposits ratings of severalcommercial banks.) By mid-June IABs, Dis-

YIELD CURVES OF GOVERNMENT SECURITIES IN BULGARIAAND EUROZONE BY END-2002

Source: BNB.

counts, FLIRBs and global bonds maturing in2015 tried the price levels of 95%, 97.5%, 96.5%and 122% respectively, and reported the pricelevels of some 94.6%, 97%, 96.8% and 118% re-spectively at the end of the first half of 2002.

The Forex MarketIn the first half of 2003 forex market trade de-

creased for the first time since currency boardintroduction. The total volume of transactionswith two-day payment value date (spot, sameand next business day) fell by some 8% on thesame period of 2002 to reach EUR 10,023.6 mil-lion. The market was almost completely bal-anced with banks’ foreign currency sales overpurchases being just BGN 14.6 million (the BNBincluded). The BNB was again a net buyer ofsome BGN 90 million, effected entirely on theinterbank market (the surplus of over BGN 117million), while transactions with final customersposted a sales growth of BGN 27 million overpurchases.

Against the background of overall forex mar-ket trade reduction, the volume of interbankmarket transactions with final customers in-creased by 8.4% on the same period of 2002, re-moving interbank trade in foreign currencyfrom the position of being the largest marketsegment.


The Equity and Corporate Debt Securities Markets

Trade PerformanceBULGARIAN STOCK EXCHANGE PRIMARY MARKET

(million BGN)

Segments Equity primary market Bond primary market Government securitiesprimary market

Securities, official unofficial official unofficial official marketearmarked for: market market market market

TRANSACTIONS - - 1.3 - -

Source: Daily BSE − Sofia and Reuters reports.

Transactions amounting to BGN 1.3 millionfor selling lev-denominated municipal bondswere conducted on the Bulgarian Stock Ex-change primary market (primary public offeringmarket). Other transactions with issuer partici-pation in the secondary market includedbuybacks (repayment of shares by the issuers)

worth BGN 1.5 million in the unofficial market,and a compensatory instruments swap forshares worth BGN 43.4 million in theprivatization market. Outside the stock ex-change, primary market transactions included afive-year corporate bond issue worth BGN 20million (consequently traded in the bourse sec-

ing periods of 2002 and 2001 respectively.

BNB SPOT TRANSACTIONS(million EUR)

Bought Sold Balance

Total (January–June 2003) 231.3 141.5 89.8

BNB with commercial banks 191.2 73.9 117.3

BNB with final customers 40.1 67.6 -27.5

incl.:

with companies and budget organizations 20.0 62.4 -42.4

cash operations at tills 20.1 5.2 14.9

Source: BNB.

The euro held a dominant position in theforex market. Its share grew to 71.5% of totalturnover, with its interbank market share ac-counting for over 81%, and transactions withfinal customers for 63%.

The depreciation of the US dollar, whichstarted in 2002, continued until late May, whenthe BNB’s official rate hit a high of BGN 1.64 perUSD 1 since the introduction of the single Euro-pean currency. Following a certain stabilizationaround the levels of BGN 1.65 per USD 1, therewas a gradual depreciation and by the end ofthe review period the rate declined to BGN 1.70per USD 1. Under existing circumstances mar-ket exchange rates closely approximated the of-ficial rate without exceeding it.

SPOT TRANSACTIONS WITH CUSTOMERS(million EUR)

Bought Sold Balance

Total (January–June 2003) 2721.8 2736.7 -14.9

incl.

commercial banks 2681.7 2669.1 12.6

BNB 40.1 67.6 -27.5

Source: BNB.

Concurrently, the volume of interbank tradein foreign currency decreased by some onequarter and was below the value of the sameperiod of 2002.

THE INTERBANK SPOT MARKET(million EUR)

Bought Sold Balance

Total (January–June 2003) 2208.9 2091.2 117.7

incl.

commercial banks* 2017.7 2017.3 0.4

BNB with commercial banks 191.2 73.9 117.3

* Some imperfections in reporting lead to a minimal differencebetween the Bought and Sold columns, which should be equal.

Source: BNB.

During the period under review the BNB re-ported a threefold increase in trade volume,posting a 3.7% share in overall forex markettrade against 1.1% and 4.5% in the correspond-

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200356VOLUME OF BULGARIAN STOCK EXCHANGE SECURITIES TRANSACTIONS

(million BGN)

Segments at whichthe instruments areregistered

segmentsA, B, C

unofficialshare

market

governmentsecurities

municipalbonds

corporatebonds

unofficialbond

market

unofficialmarket

OTHER

unofficial market

BOND MARKETEQUITY MARKETMARKETS

compensatoryinstruments

market

unofficialmarket of other

book-entrysecurities

unofficialmarketofficial market official bond market

INSTRUMENTS AND TRANSACTIONS:

Trade in primary instruments, 13.1 87.4 - 0.0 20.4 4.9 83.6 0.3

incl.:

regular 9.6 34.0 - 0.0 20.4 4.9 40.3 0.0

block, transfers 3.5 41.0 - - - - 43.3 -

tenders - 10.2 - - - - - 0.2

buyback - 1.5 - - - - - -

privatization market transactions (number) - 0.7 - - - - - -

Privatization market(against compensatoryinstruments) 0.0 43.4 - - - - - -

Derivatives (BDCs), - 0.3 - - - - - -

incl.:

regular - 0.3 - - - - - -

Source: Daily BSE − Sofia reports.

ondary market), a number of three-year bankmortgage bond issues (a tranche of BGN 5 mil-lion from a BGN 10 million issue, a EUR 7 mil-lion issue, and a EUR 10 million issue).

The volume of secondary bourse markettransactions in corporate securities includedBGN 99 million in shares, BGN 25.3 million inbonds, BGN 83.6 million in compensatory in-struments, BGN 0.3 million in rights on sharesand BGN 0.3 million in Bulgarian depositorycertificates totaling BGN 208.5 million (plusBGN 1.5 million in primary transactions inshares and BGN 43.4 million in primary transac-tions in compensatory instruments within thestructure of the secondary market). Regulartransactions in shares both in the official andunofficial market, official market bond transac-tions, and tender purchases posted an increaseon the first half of 2002. The lack of sizableblock transactions in shares would haveprompted a fall in total trade if the volume oftrade in compensatory instruments (regular andblock transactions) had not been so sizable.Consequently, the volume of bourse transac-tions in corporate securities declined by 34.5%on the first half of 2002, while the total volumeof stock exchange trade increased by 9.3%.

EquityThe first half of 2003 saw a turnaround in the

dominance of block transactions over regular

transactions in shares on the stock exchange.Currently, both types of transactions have equalweights. The unofficial market sustained itsdominant share over the official. The weight oftender procedures exhibited a growth. The larg-est block transactions were concluded at the be-ginning of the review period, including transac-tions sales of shares in a hotel, an oil distribu-tor, a resort, an engineering company and achemical company. Later, shares of an electricalstation were also traded. Similar to block trans-actions, the largest transactions in regular tradewere conducted at a price premium.

A certain interdependence was establishedbetween share price movements and pricemovements in other asset markets. The fall inprices of forex assets denominated in US dol-lars was accompanied with almost parallel priceincreases in real estate and shares. However,the lack of movement in the exchange rate coin-cided with unchanged real estate prices, whileshare prices tended to increase in line with theeffect of factors such as heightened credit rat-ings and share splits.

SOFIX, the official price index of the Bulgar-ian Stock Exchange, increased to a record highof 280.95 points and the BSE Sofia Lazard indexindicated a peak of 77.97 percentage points on27 June 2003.

On 30 June 2003, market capitalization ofcompanies whose shares were registered for


BULGARIAN STOCK EXCHANGE EQUITY VOLUME

Source: BNB.

BOURSE PRICE INDICES

Source: BNB.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200358trade on the Bulgarian Stock Exchangeamounted to BGN 1,724.3 million (BGN 316.4million of companies included in the officialmarket list and BGN 1,407.9 million for com-pany shares accepted for trade on the unofficialmarket).

BondsThe inclusion of corporate bonds issued by

the end of 2002 and early 2003 into the stock-exchange list boosted trade, and the volume oftransactions exceeded that of the whole 2002 toreach BGN 25.3 million (including transactionsin municipal bonds of BGN 6,000).

3.The Payment System and Settlement

The Real-time Interbank Gross-settlementSystem (RINGS) was launched on 2 June 2003.RINGS has radically changed both the infra-structure of the national payment system andcommercial bank liquidity management. Thenew payment system was implemented in linewith the principles of the Payment SystemsCommittee at BIS, Basle and the European Cen-tral Bank. The system’s major goal involves re-ducing systemic risk and improving the effi-ciency and reliability of the national paymentsystem. As a result of netting effected by thesystem operators, the funds required for set-tling payments initiated to the system operatorsdecrease six to sevenfold. The migration to anational payment system which is entirely newin terms of operation, organization and technol-ogy, was smooth for both commercial banksand the system’s operators. Over the review pe-riod commercial banks faced no serious prob-lems associated with liquidity management.There were no payments rejected at the close ofbusiness day due to insufficiency of funds ofany participant. Consequently, the CollateralPool, established upon the introduction ofRINGS for settling liquidity deficiencies has notbeen used.

Payments through BISERABetween January and June 2003 noncash

bank settlements through the Banking Inte-grated System for Electronic tRAnsfers(BISERA) numbered 11,557,971 (a daily averageof 110,075), totaling BGN 32,149 million (a dailyaverage of BGN 306.18 million). Of this, 59.64%in number and 47.77% in value were for budgetpayments. This data supports the trend towardsa slow increase in the number and the amountof nonbudget payments in total payments.Compared with the first half of 2002 daily aver-age payments increased by 19.44% in numberand 18.72% in value.

Payments through BORICABetween January and June 2003 transac-

tions through the BORICA card payments sys-tem numbered 18,186,473, totalingBGN 1,542,550,246.07. By 30 June 2003 therewere 1,027 ATMs, an increase of 24% on end-2002. The total number of POS terminals was3,007 (an increase of 18% over the review pe-riod) and the number of issued cards was2,055,190 (an increase of 27% on end-2002).Banks issuing debit cards and accepting pay-ments by national debit cards numbered 27.Fourteen banks issue international card prod-ucts of MasterCard and Visa and accept pay-ments effected by these cards.

Payments on Transactions inCorporate Securities

In the review period, 37,700 transactions incorporate securities were effected, totalingBGN 586,756,493. The upward trend in theaverage amount of one transaction continuedand even strengthened between January andJune 2003. Compared with the correspondingperiod of 2002 the number of transactionsdecreased by 20%, while their value increasedby 206%. Bourse payments numbered25,226 worth BGN 393,570,235, and over-the-counter payments numbered 12,474worth BGN 193,186, 258.

Payments via RINGSDuring the first month of RINGS operation

payments processed through the system num-bered 17,558 (daily average of 836), totalingBGN 7,604 million (daily average of BGN 362million). Of this, customer payments accountedfor 69.27% in number and 52.53% in value. Themaximum number of payments processed perone system day reached 1,024, and the maxi-mum amount of one payment totaledBGN 85,911,841.


NUMBER OF PAYMENTS PROCESSED BY RINGS, JUNE 2003

Source: BNB.

Differentiated tariffs for individual time inter-vals within one RINGS system day encouragethe execution of the bulk of payments in earlierhours of the day: almost half of the payments innumber and 45% in value were effected until12.00 pm, and just 8.4% in number and 10.1% in

VALUE OF PAYMENTS PROCESSED BY RINGS, JUNE 2003

Source: BNB.

value were left for the most risk interval (2.30pm – 3.45 pm, i.e. the end of the system day forprocessing customer payments). Undoubtedly,this ensured smooth execution of the paymentprocess and facilitated liquidity management.


COMMERCIAL BANK CLAIMS BY INDUSTRY(BGN’000)

31 December 2002 30 June 2003

Balance sheet Off-balance sheet Balance sheet Off-balance sheetexposure exposure exposure exposure

Individuals 192 153 16 137 505 202 12 949

Agriculture, hunting and forestry 139 987 54 337 199 969 51 587

Extracting industry 211 923 89 100 170 737 88 010

Processing industry 1 369 764 439 053 1 557 867 488 343

Electrical power, heating, gas and water 123 681 88 119 195 959 137 079

Construction 160 004 122 959 228 823 114 534

Retail, overhaul and technical services 1 724 686 472 543 2 119 947 441 283

Hotelry and catering 271 000 64 068 323 886 142 673

Transport and communications 332 064 134 512 332 765 114 664

Financial intermediacy 1 086 834 775 080 515 829 78 903

Operations in real estate 119 755 9 454 144 442 10 399

Government administration and defence 39 519 17 198 39 129 5 326

Education 1 326 60 2 059 205

Healthcare and social activities 32 326 19 186 37 734 9 244

Other services 1 435 394 247 647 1 529 512 207 275

Exterritorial organizations and services 59 698 14 887 43 665 7 299

TOTAL 7 300 112 2 564 342 7 947 525 1 909 773

Source: BNB, CB.

4.The Credit Register

In compliance with BNB Regulation No. 22the Central Credit Register (CCR) includedclaims exceeding BGN 10,000. Single claims be-low that amount were reported on an aggregatebasis, broken down by four indicators: cur-rency, sector, category (standard, watch, etc.)and sectoral attribution.

Claims over BGN 10,000, subject to the CCRsystem, are reported in individual records tillfull repayment. Nomenclatures are diverse andcontribute to a more comprehensive monitoringand analysis.

• Total claims on the balance sheet expo-sure (including claims of less thanBGN 10,000) of operating commercialbanks rose by 8.15% to reach7,947,525,000 by 30 June 2003. Off-bal-ance sheet claims amounted toBGN 1,909,773,000.

• In terms of currency, claims in Bulgarianlevs had the largest share in the balancesheet exposure, 51.63%, followed byclaims in euro, 32.43%, and those in USdollars, 15.64%.

• By loan contract term (only for loans ex-ceeding BGN 10,000) the share of loans

with a term of over three years accountedfor the largest share (38.56%) in total bal-ance sheet exposure. Claims with a termof one to three years comprised 33.07%,and those of up to one year 28.37%. It isof note that by the end of 2002, loans witha term of up to one year accounted forthe largest share (48.5%).

• The amount of claims on nonfinancial in-stitutions and individuals totaledBGN 7,431,697,000. Their share in totalbalance sheet value accounted for 93.51%(against 85.11% by the end of 2002).Claims on the retail, overhaul and techni-cal services industries had the largestshare (28.53%) in total claims on nonfi-nancial institutions and individuals, andranked first in total balance sheet expo-sure.

• Claims on the financial intermediary in-dustry accounted for 6.49% against14.88% by the end of 2002. It should benoted that pursuant to BNB RegulationNo. 22 on the Central Credit Register onlyinterbank claims with a term of over 30days are subject to reporting.


COMMERCIAL BANK CLAIMS BY CURRENCY


Currency Balance sheet Off-balance sheet Balance sheet Off-balance sheetexposure exposure exposure exposure

BGN 3 540 514 883 094 4 103 585 829 855

EUR 2 394 382 1 217 965 2 577 211 694 647

USD 1 347 185 451 894 1 243 280 374 069

CHF 4 963 8 371 1 447 8 675

GBP 13 069 2 990 22 002 2 432

Other 0 28 0 95

TOTAL 7 300 112 2 564 342 7 947 525 1 909 773

CLAIMS OVER BGN 10,000 BY LOAN CONTRACT TERM(BGN’000)


Currency Balance sheet Off-balance sheet Balance sheet Off-balance sheetexposure exposure exposure exposure

Up to 1 year 2 542 648 898 921 1 893 707 913 383

From 1 to 3 years 1 709 276 554 405 2 207 944 561 574

Over 3 years 1 939 980 1 082 894 2 574 093 415 414

Total 6 191 905 2 536 220 6 675 744 1 890 371

Source: BNB, CB.

Source: BNB, CB.


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V.

The Banking Sector andBanking Supervision


1.Bank Assets and Liabilities

Banking system overall assets by end-June2003 totaled BGN 15,359,751,000: an increase of4.94% on end-2002. Growth in total assets ofthe ten biggest Group I banks was 6.34%, fol-lowed by Group II banks with a 1.97% increase.

VOLUME AND STRUCTURE OF BANKING SECTOR ASSETS

Foreign banks’ branches registered a drop of2.05%. In practice, not all the banks posted as-set growths during the reporting period. End-June reports from eight banks and fourbranches showed lesser balance sheet figures.

Note: Since early 2003 the Banking Supervision Department has changed commercial banks grouping for statistical purposes: Group Ibanks consists of the ten biggest banks based on the amount of their assets as of each particular period; Group II banks includes allthe remaining banks; Group III banks comprises foreign banks’ branches in Bulgaria. For the purposes of statistical data comparabil-ity with the previous periods, the present Group I banks is the equivalent of the former Group I and Group II banks at end-2002, andthe present Group II banks is the equivalent of the former Group III and Group IV banks. No changes occurred in foreign banks’branches.

Source: BNB.

Credit portfolio growth rates significantlyexceeded those of assets. In the first six monthsof 2003 gross credit rose by 19.47% (BGN 1,234million). Banks’ enhanced lending expansionwas financed both by asset restructuring and

increased deposits of nonfinancial institutions(by 6.50%). The share of credit reached 47.54%in total assets (against 41.15% by end-2002).Credit portfolio growth of Group I and Group IIbanks was 24.36% and 25.65% respectively. Pre-


cisely the opposite developments affected for-eign banks’ branches: their credit portfolioscontracted by 11.01%.

The trading and investment portfolios occu-pied 9.26% and 9.60% of overall assets. Com-pared with end-2002, the trading portfolio roseby 18%, while the investment portfolio indi-cated a 33% increase. The trends towardsbanks’ increased earning assets which ensurehigher profitability and liquidity in the bankingsystem were sustained.

As of June 2003 claims on financial institu-tions dropped from BGN 3,580 million toBGN 2,919 million on end-2002. This downwardtrend reflected the continuing process of assetrestructuring which resulted in a decreasedshare of this indicator in total assets (from24.16% by 31 December 2002 to 19.01% in thereporting period). The reported decline was en-tirely due to downward trends in Group I andGroup II banks (by 20.34% and 17.81% respec-tively), while Group III banks registered an in-crease of 25.03%.

Source: BNB.

SELECTED INDICATORS OF THE BANKING SYSTEM BALANCE SHEET

An analysis of the balance sheet forex com-ponent for the first half of 2003 shows that thestatus quo of end-2002 was sustained: a pre-dominant share of assets in euro comparedwith other currencies. Overall assets in foreigncurrency totaled BGN 8,356 million, includingBGN 4,505 million in euro. Banking systemforex liabilities amounted to BGN 7,377 million,of which BGN 3,304 million obligations in euro.The amount of the long position in euro offsetthe short positions in levs and other currencies.Liabilities denominated in a currency other thaneuro reached BGN 3,845 million (29% of total li-abilities) deposited in claims on financial insti-tutions (BGN 1,511 million), loans (BGN 956 mil-lion), cash (BGN 446 million), trading portfolio(BGN 362 million), investment portfolio

(BGN 348 million). Foreign currency loans com-prised 13.24% of total credit, commercial loansoccupying the most significant share and con-sumer loans with the lowest share. The struc-ture of invested attracted resource in other cur-rencies confirms banks’ prudence expressed inthe predominance of low-risk and high-liquidassets in these currencies.

The structure of banking system liabilitiesand equity matched the end-2002 levels of itsmajor parameters. Predominant among themremained deposits (76.89%) with the largestshare of deposits of nonfinancial institutions(69.65%) in overall liabilities followed by equity(13.72%). This structure was the same by bankgroup. The level and structure of banking sys-tem funding sources underwent no significant


VOLUME AND STRUCTURE OF BANKING SECTOR LIABILITIES AND EQUITY

Source: BNB.

changes. Total deposits rose by 4.73% to thetune of BGN 11,810 million with higher growthfor deposits of nonfinancial institutions (6.5%).

Short-term borrowings fell by 42.08% to BGN132 million and long-term borrowings increasedby 15.51% to reach BGN 447 million.

The above trends in banking system balancesheet structure have been confirmed by devel-opments in each of the three bank groups. Theten biggest Group I banks played a key role inbanking system parameters. Their market sharewas 75%, picking up by 1%. The shares of indi-vidual balance sheet aggregates were: claimson financial institutions dropped from 75% byend-2002 to 73% by end-June 2003; tradingportfolio also fell from 68% to 60% in bankingsystem total aggregate; similar downwardtrends occurred in the investment portfolio: afall of 3% to 93% by end-June (96% by end-2002); loans posted growth in their marketshare by 3% reaching 74% of total banking sys-tem credit; deposits, and particularly those ofnonfinancial institutions, remained unchangedat 76% and 81% respectively; equity rose by 1%to 77%. These parameters demonstrate the sig-nificant effect of these banks over the entire be-havior and risk profile of the banking system.Lending was the most dynamic parameter inthis group. Loans of the ten biggest banks in-creased by BGN 1,058 million (24.36%) on 31December 2002 which was 82.72% of totalcredit growth in the system.

Group II banks (the other 18 commercialbanks) own 19.3% of banking system assets.The market share of claims on banks was 19%,a fall of 1% on end-2002. Trading portfolio rosefrom 30% to 38% of total banking system as-sets. A similar trend was registered in the shareof investment portfolio: a 3% rise to 5% of totalinvestment. Loans and deposits kept theirshares at 19% and 17%. Equity picked up, itsshare reaching 23% of banking system totalcapital. Lending by some of the banks in thisgroup to Bulgarian medium and small businessunder various programs financed through for-eign financial institutions’ credit lines is a fea-ture of Group II banks. Therefore, long-termborrowings occupied the major share of 53%.Some banks were restricted in their activities bycompetition from biggest banks and limited op-portunities for attracting funds.

Foreign banks’ branches included in GroupIII kept their market share at 5.7%. Predominantamong them remained claims on financial insti-tutions (8% against 5.6% by end-2002) followedby loans (7% against 9.5%). Related parties ac-counted for 81% of claims on financial institu-tions. Attracted funds primarily involved finan-


Source: BNB.

DISTRIBUTION OF ASSETS, DEPOSITSAND LOANS BY BANK GROUP

Assets as of 30 June 2003

Deposits as of 30 June 2003

Loans as of 30 June 2003

MARKET SHARE* BY TYPE OFOWNERSHIP

* Based on assets amount.

Source: BNB.

31 December 2001

31 December 2002

30 June 2003

cial institutions’ deposits (BGN 160 million) andlong-term borrowing (BGN 28 million) placed inclaims on financial institutions (BGN 190 mil-lion).

The above charts show the changed marketshare of government banks reflecting the in-creased share of DSK Bank. However, of note isthe fact that the sale of DSK Bank to the Hun-garian OTP Bank was concluded in the report-ing period. Following DSK Bank privatization,government share in the banking sector willdrop below 1%.

During the review period the banking systemcontinued strengthening its position of major fi-nancial mediator in the economy. Diversificationof offered bank services led to increased pay-ments through commercial banks, and creditgrowth resulted in an increased Credit to GDP ra-tio. Comparing the accumulated GDP over thelast four quarters amounting toBGN 33,061,943,000, the share of loans increasedto 23.07%. This suggests that further growth inthis proportion to 25% is expected by end-2003.A similar trend was reported in the Deposits to


DEGREE OF BANKING INTERMEDIACY IN THE ECONOMY

Source: BNB.

DISTRIBUTION OF MAJOR MARKET SHARES BY BANK GROUP

Note: Since early 2003 banks have been rearranged in three groups for statistical purposes.

Source: BNB.


GDP ratio (an increase from 34.9% at the closeof 2002 to 35.72%) reflecting the sustainablegrowth of confidence in the banking system.

Measured by the Herfindahl-Hirschman In-dex of market concentration, processes indicatemoderate levels of concentration in Group Ibanks’ loans, assets and deposits and lower lev-els of concentration for the other groups. On anindividual bank level scatter is considerable. Sofar, no financial institution indicates moderateor high levels of concentration in major balancesheet aggregates.

Revenue, Expenditure, and ProfitBetween January and June 2003 the Bulgar-

ian banking system reported a net profit ofBGN 218,487,000: an increase of 65% orBGN 85,772,000 on the corresponding period of2002. Banking system income was generatedfrom major bank operations with a significant ef-fect of reintegrated provisions (BGN 48 million)consistent with enforcement of the InternationalAccounting Standards. Group I banks reportedthe largest share of profit (82%) followed byGroup II banks (15%) and Group III banks (3%).

The analysis of financial result sources indi-

cates an insignificant influence (8%) of extraordi-nary operations and foreign currency revaluation.Overall profit from revaluation totaled BGN15,578,000, and from extraordinary operationsBGN 2,689,000. These trends were acknowledgedin the three bank groups. Banking system incomesuggests a tendency toward stability based onpermanent sources of major operations coupledwith an insignificant influence of extra operationsand foreign currency operations.

The prior year’s upward trend in the volumeof high-income interest assets and net incomefrom major bank operations continued develop-ing in the first half of 2003.

Net interest income totaled BGN 345,516,000and profit prior to forex revaluation and extraoperations accounted for BGN 262,543,000.Banking system profit from trading portfolio to-taled BGN 46,040,000, foreign currency revalua-tion was BGN 15,578,000 and extra profit camemerely to BGN 2,689,000. Minor values of theprofit from forex revaluation and extra opera-tions reflect decreased contribution of thesetwo items to banks’ operating results.

Presented by some major indicators, bank-ing system income is as follows:

MAJOR INCOME INDICATORS OF THE BANKING SYSTEM(%)

June 2002 June 2003

Return on assets (ROA) – post-tax net profit 2.13 2.95

Operating profit − core ROA 2.86 3.44

Net interest income 3.85 4.56

Operating expenditure (noninterest expenditure) 4.32 4.47

Extra profit/loss 0.15 0.25

Return on equity (ROE) 16.70 26.23

Note: All indicators based on average assets.

Source: BNB.

Data suggests that banking system profit-ability was high since profit was a stable do-mestic source of bank capital support. Com-pared with the previous half-year period,values of all major income indicators improvedthroughout the reporting period. Overall profit-ability of Group I banks was much higherthan that of Group II banks. The average net in-come from major bank operations in Group Ibanks came to 4.07% against 2% in Group IIbanks.

Growth in net interest income (from 3.85% to4.56%) reflects the continuing rise in credit ac-tivity. The share of interest assets in total assetssustained its average level of about 86% for the

banking system. Compared with the prior half-year period, return on interest assets and priceof interest liabilities fell slightly (from 7.29% to7.15% and from 2.19% to 2.01%) sustaining thespread at 5.1%. The slight fall in the return oninterest assets was ascribable to lower interestrates on loans. Simultaneously, the return onloans was beneficially affected by increasedlong-term loans with average interest rates sig-nificantly higher than those on short-termloans. Sustained spread coupled with increasedvolumes additionally supported net interest in-come growth. The half-year saw a slight excessof interest assets over interest liabilities, an-other favorable factor behind bank profitability.


33 A median of a bank group or of the entire banking system is obtained by taking the average two indicators from all bankindicators arranged by size, and dividing their sum by two.

34 An efficiency ratio measures the share of noninterest expenses generated since the beginning of the year in total revenuefrom major bank operations.

The share of expenditure on economic ele-ments rose slightly in total assets year-on-year,reflecting both the policy pursued by mostbanks toward intensification of bank activity,and changes in information systems.

Profit from forex revaluation and from extraoperations was small and its influence on over-all financial results in the banking system wasinsignificant.

The value of the return on equity indicator(ROE) came to 26.23% (against 16.7% in the firsthalf of 2002) indicating expected good levels of

2.Compliance with Prudent Banking Requirements

BANKING SECTOR INCOME AND EXPENDITURE

Source: BNB.

profitability. ROE values in three of Group Ibanks and nine of Group II banks stood belowthe median33 of the banking system (19.15%).

The median of the efficiency ratio34 for thebanking system was 69.89%, its values movingwithin a broad range. A low efficiency (at valuesover 100 percent) was registered in four banks.

By end-June 2003 the payroll number of em-ployed in the banking system came to 20,997(against 21,616 at the close of 2002). Assets peremployee rose to BGN 732,000 againstBGN 677,000 by 31 December 2002.

Risk Profile of the System and MajorTypes of Risk

Trends typical of past periods were repeatedbetween January and June 2003: a continuingasset restructuring by increasing lending anddiversifying the customer base and product

range is clearly pronounced in Group I andGroup II banks; a gradual decline in total capitalindicators while maintaining regulators’ valuessignificantly higher than minimum; keepingforex and market risk under control; ambitionsto increase market shares mostly through creditexpansion.


Banks have adopted International Account-ing Standards and have changed their financialreporting as required for supervisory purposesin terms of scope and contents. This enabledthe Banking Supervision Department to monitorrisks in detail and if necessary adjust supervi-sory strategies.

Credit risk remained dominant among otherbanking system risks. Compared with end-2002lending grew by 19.47%, with commercial lend-ing again leading with 73.77%. The share ofthese loans tended to decrease from early 2003in favor of greater consumer and housingloans. This trend reflects commercial banks’ ef-forts to ensure greater risk diversification, sincerisk inherent in consumer and housing loanportfolios is the lowest: 3.28% and 2.96% re-spectively against 9.31% of classified commer-cial loans and 8.30% of overall loans. By the endof June 2003 the forex structure of loans re-vealed that lev loans accounted for 55.18%,euro loans for 31.58%, and loans in other cur-rencies for 13.24% of the total. A mere 28.62%of all deposits in foreign currency other thaneuro have been transformed into loans with anidentical component. This confirms the conclu-sion made for previous periods that banks arereluctant to increase lending by combining for-eign currency and other risks. However, itshould be noted that loans comprising 47.54%of assets (the average value for the bankingsystem) and 64.58% of the loans to deposits ra-tio (the average value for the banking system)are indicative of a threshold above which anyincrease in classification sharpness35 and creditrisk in individual exposures, banks and indus-tries would seriously threaten some banks. Thisprocess is being carefully monitored by theBanking Supervision Department and a proac-tive prevention strategy has been designed.

Increased lending boosted loans of overBGN 1 million to BGN 4,450 million. As a rule,they are disbursed to borrowers with goodcredit history, a conclusion based on the cus-tomers’ portfolio classification structure. Theshare of standard loans in this segment com-prised 91.52%, and that of loans classified asloss, 2.04%. However, there are some cases oflarge exposures of borrowers to the systemwhich, should worsen their financial perfor-

mance, may erode the capital positions of morethan one bank, and to challenge depositor con-fidence in the banking system. A few bankswhich mostly seek corporate business by offer-ing large exposures (within the meaning of theLaw on Banks and supervisory regulations) topersons related to major shareholders causesupervisory concerns. These relationships aresubject to on-site inspections with a view toprevent this model from becoming establishedin the banking system.

The parameters of market risk did not experi-ence significant changes. As a base indicator ofcurrency risk, the open foreign currency posi-tion was short, accounting for -4.36%. By June2003 liabilities exceeded assets by BGN 85 mil-lion which did not affect the fundamental pa-rameters of the position: short in US dollarsworth USD 113 million; long in euro totalingEUR 588 million.

No changes occurred in terms of price riskparameters. The policy of dominant investmentin securities issued by the Bulgarian govern-ment and G24 prime-rate issuers was sus-tained. The portfolio of corporate securities isinsignificant and efficiently controlled.

Interest rate risk displayed particular devel-opments. The excess of interest assets over in-terest rate liabilities decreased from BGN 1,261million in early 2003 to BGN 876 million by June2003. In the short horizon of up to 90 days inter-est liabilities exceeded assets, with the trend re-versing over the horizon of more than a year.This reflects the ambition of banks to increasemedium and long-term lending, one of the fac-tors behind credit growth, which remains insuf-ficiently secured by borrowed funds with ad-equate maturity. However, the conclusion madefor previous periods is still valid: the imbalancein terms of structure and amount may be ad-equately offset by the relatively high system in-terest rate margin of 5.30% in June.

Liquidity risk remained among the leastacute and threatening problems of the bankingsystem. Despite the gradual decline in tradableassets36 their share accounting for 30.06% of to-tal assets provides a sufficient cover in case of asignificant run on deposits of about 20% – 25%of the whole deposit base.37

35 Sharpening of classification means an increase in the share of loans classified as substandard, doubtful and loss inbanks’ credit portfolios.

36 Tradable assets include cash, demand deposits and demand deposits of up to seven days, time deposits at sight and timedeposits of up to one month, receivables under reverse repurchase agreements at sight and up to one month and securi-ties in trading portfolio.

37 A hypothesis appearing only in case of severe problems experienced by a bank and/or the banking system.


CAPITAL BASE, RISK COMPONENT AND ASSETS

Source: BNB.

Note: Since early 2003 banks have been rearranged in three groups for statistical purposes.

Source: BNB.

Capital Position State and TrendsThe level of capital risk in the banking system

is low given the amount and risk profile of finan-cial institutions. Most banks’ capital is sufficientto cover the progressively increasing risk com-ponent and to ensure an adequate degree of as-set coverage. Financial institutions comply withthe statutory requirements of capital regulators.

Major regulatory indicators (total capital ad-equacy ratio and primary capital adequacy ra-tio) are well over the minimum regulatory re-quirements but the downward trend in thevalue of these indicators continued in many

CAPITAL ADEQUACY RATIOS FOR TOTAL BANKING SYSTEM AND BY BANK GROUP(%)

2000 2001 2002 VI.2003 2000 2001 2002 VI.2003 2000 2001 2002 VI.2003

Group I 42.0 37.0 28.7 23.1 26.3 23.3 17.4 15.3 15.2 13.3 12.6 12.9

Group II 27.4 22.6 19.3 24.1 19.3 14.9 12.5 19.8 12.2 11.3 11.1 16.1

Group III 20.5 21.8 23.1 - 16.5 17.2 17.5 - 11.4 10.4 10.9 -

Group IV 51.3 46.7 37.3 - 44.8 40.2 34.3 - 31.7 28.8 23.5 -

Total 35.5 31.1 25.2 23.3 24.9 21.6 17.0 16.3 15.2 13.6 12.6 13.6

Commer-cial banks

Total capital adequacy Primary capital adequacy Degree of assets coverage

banks. The total capital adequacy ratio contin-ued to fall gradually: from 25.16% at the end of2002 to 23.32% by the end of June 2003.

The major factor affecting capital ratios ad-versely is credit expansion at the expense ofplacements in banks and investment in securi-ties. This prompts an increase of the risk com-ponent in its highest risk part. Compared withthe end of 2002 the risk component of assetsgrew by 21.89%, primary capital by 16.86%, andcapital base by 12.95%. An increase in share-holder capital was reported only by ProCreditBank (by BGN 12 million) and Raiffeissenbank


(by BGN 9.8 million). Due to the faster growthof loans compared with assets, the degree ofasset risk indicator increased from 50.22% bythe end-2002 to 56.14% by end-June 2003.These values do not cause concerns as tobanks’ ability to back existing risks by ownfunds given the increasing leverage ratios ofprimary capital and degree of asset coverage.The banking system’s capital adequacy ratioalso benefited from the continuous slowdownin the classified assets indicator (as a share ofthe capital) to 18.9% against 25.48% at the endof 2002. This indicator shows the probability ofthese assets to incur losses, and the portion ofthe capital which will be required to cover theselosses.

Distribution of banks by capital adequacy ra-tio reveals that most banks reported capital ad-equacy ratios higher than or close to the bank-ing system average. The capital adequacy ratiosof four banks were close to the minimum regu-latory requirement. A possible increase in theirassets or any adverse trends in their quality un-der an unchanged amount of equity may lead toa fall in capital indicators under the statutorilyrequired level.

The total capital adequacy ratio of Group Ibanks is 23.06%, and that of Group II banks,24.13%. These high values are indicative of acertain surplus of risk-weighted regulatory capi-tal. In terms of the banking system’s ability tomaintain the required 12% capital adequacy ra-tio under the risk component of assets worthBGN 8,400 million, the required capital shouldamount to approximately BGN 1,008 million.The actual capital in the banking system totalsBGN 1,959 million. This suggests that the exist-ing capital base in the banking system is able tocover almost double the risk component of as-sets. Banks included in Group I reported a sur-plus of approximately BGN 707 million and thatreported by Group II banks amounted toBGN 244 million.

Banking System Asset QualityDespite the sizeable increase in loans and

continuous restructuring of assets, betweenJanuary and June 2003 no significant changeoccurred in the structure of classified assets onthe previous quarter. The share of problem as-sets remained low, accounting for 1.18% ofgross assets against 1.32% in early 2003. This isattributable to a decrease in problem assets andan increase in assets.

Given the credit expansion which madeloans the largest aggregate in the asset struc-ture, the proportion of classified assets in the

banking system gross assets comprised 4.06%by the end of the review period. Currently, thecredit expansion does not threaten banks’ creditportfolios. By the end of June 2003 standardloans sustained their values of over 90%. Themedian of classified loans in the banking sys-tem is 7.84%. The picture by individual banks issimilar, with the values of the median of GroupI and Group II banks approaching that of thebanking system. Classification of exposures re-mained unchanged from the previous quarter.The share of classified loans accounted for8.30% in gross loans. The share of loans classi-fied as watch comprised 45.74% of the bankingsystem gross classified assets. The bulk of clas-sified assets has been regularly serviced withno serious delays. Assets past due between 31and 91 days by bank group and for the entirebanking system accounted for less than 1% ofgross assets. No significant changes occurredduring the review period. By bank group thepicture is as follows:

(%)

June 2003

Group I

Standard 92.30

Loss 2.57

Group II

Standard 90.53

Loss 3.38

Group III

Standard 88.44

Loss 0.06

By the end of June 2003 the degree of assetprovisioning was 2.24% meeting the require-ment for good asset quality. The banking sys-tem allocated provisions tended to declinewhile assets exhibited an increase. By the endof June 2003 provisions totaled BGN 352 mil-lion in absolute terms against BGN 404 millionby end-2002. The low provisioning of claims onfinancial institutions (0.05%) reflects the insig-nificant amount of classified placements inbanks. By the end of June 2003 claims on finan-cial institutions totaled BGN 2,920 million; ofthis, only BGN 5 million were classified, includ-ing BGN 4 million classified as watch exposuresand BGN 923,000 fully provisioned loss. Provi-sioning of classified exposures accounted for42.01% by end-June 2003, and provisioning ona portfolio basis 1.04%. Exposures classified ona portfolio basis comprised 94.11% of the totalcredit portfolio. Provisioning of off-balancesheet commitments accounted for 3.51%.


Banking System Liquidity PositionBetween January and June 2003 commercial

banks were not exposed to liquidity pressureand a slight downward trend in the values of in-dicators was sustained in the banking system.During the review period no problems occurredin respect of minimum required reserve mainte-nance, and following a long preparatory workthe Real-time Interbank Gross-settlement Sys-tem (RINGS) was commissioned. One of its ma-jor advantages involves optimized liquiditymanagement boosting asset profitability.

Trends in Major Liquidity IndicatorsTradable assets exhibited a decline on the

previous review period both in absolute terms(averaging 10% for the banking system) and asa share of gross balance sheet assets. The me-dian of the tradable asset indicator as a share ofgross assets for Group I is 28.28%, for Group II30.92%, and for foreign bank branches 23.71%.Despite the gradual fall, tradable assets are stillable to provide an adequate cover of borrowedfunds and are sufficient to perform the func-tions of an agent in the settlement system (themedian of the ratio for Group I is 37.09%, forGroup II 39.49%, and for Group III 24.83%). Thisconclusion has been also proved by the ad-

38 These funds include total deposits of financial institutions, and short-term funds borrowed by the BNB and banks.

LOANS TO NONFINANCIAL INSTITUTIONS

Source: BNB.

equate cover provided by high liquid assets onhigh-liquid liabilities, a ratio which posted aslight increase to 19.96% for the banking sys-tem.

The sustained upward trend in the loans todeposits ratio is ascribable to the higher loangrowth compared with deposits. Of 28 banks inthe banking system, 21 reported a ratio of morethan 50%, including ten banks with a ratio ofover 90% (in some banks lending was mostly fi-nanced on the account of long-term resourcesand credit lines).

Pledged securities as a share of the total vol-ume of securities in trading and investmentportfolios accounted for 39.36%, with Group Ibanks contributing most significantly to this in-crease (the median of Group I banks increasedto 34.64%, while that of Group II banks fell by4% to 36.21%). A significant share of pledgedsecurities was used to ensure servicing the gov-ernment budget and a smaller portion to attractresources against pledge of securities.

The share of noncore short-term borrowedfunds38 in gross assets averaged 7.92% for thebanking system. The dependence of Group Ibanks (having the largest share in the depositmarket) on noncore borrowed funds remainedinsignificant: the median of this group was3.96%, while some banks included in Group II


relied on these funds for launching new prod-ucts and extending their market share (the me-dian of Group II banks increased by 1% to7.45%). Foreign bank branches reported highvalues of this indicator: the median of Group IIIbanks was 33.78%, reflecting a significantamount of resources extended by the banks’head offices.

The volume of long-term financing rose toBGN 447 million and its share in gross assetsremained low, 2.85%.

The analysis of banking system primary and

secondary liquidity indicates an adequate coverof liquid assets by borrowed funds within themeaning of Regulation No. 11 of the BNB. Thematurity structure of cash flows by time horizonwas sustained in accordance with reports underRegulation No. 11. Although the cumulative netcash flows of the banking system are basicallyoutgoing within the time horizon of eight daysup to one year, the imbalance between assetsand liabilities does not cause concern due to asufficient volume of tradable assets to meet apossible run on funds.

3.Banking Supervision between January and June 2003

Supervisory Regulations andAccounting Methodology

No significant changes occurred in supervi-sory regulations during the review period. Theonly change involved amendments to Regula-tion No. 2 on the licenses and permits grantedby the BNB which allow banks to act as insur-ance agents.

The need of improving internal control inbanks and applying international accountingstandards in this field entailed redrafting Regu-lation No. 10 of the BNB on the internal controlin banks.

The draft regulation complies with the prin-ciples of the Basle Committee on Banking Su-pervision for internal controls in credit institu-tions, for improving corporate managementand relationships between internal control,banking supervision authorities, and externalauditors. General and specific requirements andstandards for professional practice in internalcontrol have been taken into account. In accor-dance with the philosophy of the new regula-tion, achieving internal control efficiency is amajor responsibility of any bank’s manage-ment. The scope of the regulation was extendedby including requirements related to controlsystems, the expertise of the person headingthe specialized internal control unit, and that ofinternal auditors.

Between January and June 2003 the BankingSupervision Department conducted an analysisof the periodical supervisory financial reportingof commercial banks introduced as of 1 January2003. Some changes intended to improve theprecision of report forms and instructions ontheir design were made. The scope was wid-

ened and the evaluation of the types of financialinstruments in trading and investment portfo-lios was changed. Changes aimed at more ana-lytical presentation of the information were alsomade in the income statement and in thesupplementary statements on disclosing anddecoding particular items.

Preparatory Work for the New BasleCapital Accord II

During the first half of 2003 the QuantitativeImpact Study (QIS 3) on the effect of the newBasle Capital Accord II which will come into ef-fect in 2006 was finished. QIS 3 was aimed atestablishing how the new methods for comput-ing risk-weighted assets and those for comput-ing operational risk will affect the capital ad-equacy ratios of banks in individual countries.The results will be used to improve the projectprior to its final adoption.

At the final stage of the Study definitions ofbanks’ income groups were specified. Based onthese groups, individual operational risk com-ponents will be computed by applying variousfactors. The effect of the significant differencesin profitability in individual countries, where theabsolute values of capital requirements relatedto operational risk were very high, was alsotaken into account. Therefore, the Basle Com-mittee on Banking Supervision initiated a stan-dard reduction to the amount of average profit-ability differences in G10 member countries.

The analysis of the effects of the new BasleCapital Accord II suggests that if present levelsof equity are sustained, most Bulgarian bankswill comply with capital adequacy require-ments.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200376of a qualified equity interest in nonbank compa-nies. Twenty seven certificates of qualificationand professional experience in banking were is-sued to persons wishing to become membersof commercial banks’ management bodies. Pur-suant to Regulation No. 8 of the BNB one bankwas issued a permit to include in its supple-mentary capital reserves an amount borrowedas subordinated term debt. Over the review pe-riod the BNB prepared and sent one (negative)statement of opinion on the sale of one bank inliquidation.

The Banking Supervision Department re-quired from banks statements of opinion onabout 70 customer claims lodged against them.Based on these statements of opinion, claim-ants were advised of their right to protect theirinterests. In some cases, as a result of examina-tions some banks were forced to take measuresfor breach removal.

On-site Supervision (Inspections)Between January and June 2003 nine com-

prehensive supervisory inspections were car-ried out, encompassing five Group I banks andfour Group II banks. Inspections were con-ducted in accordance with a schedule preparedin advance. Ratings of all banks have been re-vised under the CAMELS complex. As a result,three of the inspected banks were assignedhigher ratings, the ratings of four banks re-mained unchanged, the rating of one bank waslowered and one bank was rated for the firsttime. In accordance with the established viola-tions and findings made in supervision reportsa number of formal and informal measures in-tended to improve bank operations were pro-posed to violating banks.

As a whole, inspected banks adequatelyevaluate major bank risks, comply with bankinglegislation and the internal statutory frameworkand apply reliable and modern risk manage-ment procedures. Compared with previous in-spections, the share of classified assets exhib-ited a decline, reflecting a significant growth ofnewly extended loans, on the one hand, and theimproved measuring, management and super-vision over credit risk, on the other. This led toa decrease in the share of classified assets incapital and reserves and evidenced an improve-ment in banks’ credit portfolios. The generalconclusion as a result of conducted supervisioninspections suggests that banks are still in theprocess of designing and testing the rules andmethods for evaluation of risk exposures, irre-spective of the enforcement of the new Regula-tion No. 9 of the BNB on the Evaluation and

Supervisory CooperationBetween January and June 2003 bilateral

Memoranda of Understanding with Italian, Al-banian and Dutch supervisory institutions wereprepared and signed. The bulk of preparatorywork for signing agreements with French, Aus-trian, Hungarian and Macedonian supervisoryinstitutions was completed. In compliance withthe banking supervision program under the Co-operation Agreement signed between the BNBand the Banque de France and DeNederlandsche Bank, the work was directed intraining the experts of the Banking SupervisionDepartment in supervisory treatment of marketrisk and money laundering. The training targetwas to improve understanding of financial in-struments and adjustment of supervisory prac-tice in line with the European directives andBulgaria’s specific conditions.

Supervisory Administration, Licensesand Permits

The Banking Supervision Department con-trols compliance with statutory requirementsfor conducting bank operations, and corre-spondingly enforcement of supervisory mea-sures and sanctions against violations. BetweenJanuary and June 2003 eleven supervisorymeasures were enforced on nine commercialbanks. Four of them included orders againstbreaches of statutory requirements, and the re-mainder included letters of prescription andrecommendation. A property sanction amount-ing to BGN 20,000 was imposed on one bank inwhich breaches of Article 30, para. 1 of the Lawon Banks had been established. The BankingSupervision Department sent more than 50 let-ters to banks with recommendations to improvepractice. There were eight cases where supervi-sory measures were enforced after on-site in-spections.

Between January and June 2003 amend-ments to the articles of association of 12 bankswere reviewed. Adequate recommendationswere made to most banks in the process of pre-paring the draft amendments to the articles ofassociation. Therefore, no objections to theamendments were made. During the first half of2003 the first stage of licensing of one newbank was finished. By a letter of the BNB Gover-nor the company under incorporation was in-formed of BNB readiness to grant a licenseupon meeting the remaining requirements.Thirteen permits were issued under Article 19and Article 19b, including leaves for the acquisi-tion of over 10% of bank capital, and acquisition


Classification of Risk Exposures of Banks andthe Allocation of Provisions to Cover Impair-ment Loss and International Accounting Stan-dards in early 2003. To this end, the manage-ment bodies of these banks were recommendedto introduce the principles and methods forevaluation of risk exposures efficiently andfully. There are still some cases of credit con-centration in one industry or in individual share-holders which traditionally run a higher creditrisk.

In structural terms, the share of assets ofhigher profitability posted a growth whichhelped increase banks’ profitability and oppor-tunities to accumulate reserves. However, thisincrease did not have a positive effect on the in-comes and capital of some banks due to therelatively high cost of borrowed funds and sig-nificant operating expenditures.

In general, capital and its components cov-ered the risk profile of banks irrespective ofdownward trends in capital indicators, consis-tent with bank expansion and increased lend-ing. Any possible increases of credit risk in lessprofitable banks will require adequate reservesand higher capital to cover. Most of the in-spected banks rely on the support of their ma-jority shareholder and when necessary the capi-tal may be increased. There are a few bankswhich do not have clearly defined capital strate-gies and coupled with insufficient incomes pro-vide unclear capital growth prospects. With re-gard to the statutory requirement for capitalstructure transparency, a number of banks haveinitiated changes in capital structures and re-placement of shareholders registered in off-shore zones.

Reproofs to banks’ management bodieswere associated with the lack of efficient orga-nization of operations and thorough internalprocedures for monitoring, evaluating and con-trolling market risks. Interest rate measurement,monitoring and management as a tool for theefficient reduction of interest rate imbalancesand better profitability management appearedto be the most underestimated of all marketrisks.

The close relatedness of the managers ofsome banks with their shareholders had an ad-verse effect on the systems for risk monitoringand control. Usually deviations from banks’lending policies and procedures are connectedwith loans extended to shareholders or compa-nies related to the same shareholders. Usually,such credit transactions are not subject to in-spection by internal control bodies. On theother hand, the extensive increase in banks’

credit portfolios is not always supported by ad-equate organization and sufficient human re-sources for credit management. This createsconditions for weaknesses in the credit processand increases the potential risk of asset worsen-ing. To this end, the Banking Supervision De-partment managers organized a meeting withthe managers of some banks, where the oppor-tunities to limit credit risk and to improve over-sight and management of the increasing vol-ume of credit transactions were discussed.

Off-site SupervisionThe Banking Supervision Department’s work

in the field of overseeing major risks in thebanking system and individual banks based oncurrent financial reports and data provided bythe Early Warning System results in assigningratings to banks under CAEL (on a quarterly ba-sis) and identifying trends (stable, ascending,descending) in the risk profile of each individualbank. This pursued immediate reaction tochanges in risks within the banking system andindividual banks, and correspondingly forecast-ing the development, depth and acuteness ofproblems. This aspect of the Banking Supervi-sion Department work helped support the de-velopment of a flexible policy of on-site inspec-tion and provides the required database andanalysis for exact assessment of current finan-cial performance of banks and the banking sys-tem as a whole.

Off-site supervision prepares experts’ stud-ies on the effect of proposed changes in finan-cial reporting and supervisory regulations. Con-currently, off-site supervision is responsible forenacting imposed rehabilitation supervisorymeasures intended to reduce the risks whichentailed enforcement of these measures. Thisreveals the method under which one of the as-pects of supervision activity associated withrisk-based supervision is realized.

The Off-site Supervision Division finished itswork on a project involving the design and in-troduction of a new unified report on banks’ op-erations. Based on this report, the scope of pa-rameters subject to oversight by the EarlyWarning System was extended. The work onimproving analytical instruments in line withthe most advanced supervision samples contin-ued.

Special SupervisionBetween January and June 2003 target su-

pervisory inspections were carried out in fourcommercial banks, ten finance brokeragehouses and one company issuing bank cards.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200378Major violations established as a result of in-

spections include:• enactment of the Foreign Exchange Law

and related regulations revealed caseswhere foreign exchange transfers hadbeen effected by resident and nonresi-dent legal entities or individuals withoutgrounds-for-payment documents, sub-mission of incorrect information aboutcross-border payments in violation ofBNB instructions on the enactment ofBNB Regulation No. 28, noncompliancewith the provisions of BNB RegulationNo. 27 of the BNB on the registration of fi-nancial transactions between residentsand nonresidents, violations of Regula-tion No. 26 of the BNB and the Instruc-tions on the registration and reporting offoreign currency transactions with cus-tomers (individuals and legal entities);

• breaches of the Law on the Measuresagainst Money Laundering and the Ruleson its enactment were mostly associatedwith incomplete customer identification,uncompleted declarations on the origin offunds, customer files which had not beenupdated, lack of data on customers mak-ing transactions subject to licensing, lackof systems and criteria for identifying sus-picious e-banking transactions, lack ofstaff training programs complying withthe specificity of this bank activity, and

obsolescent internal rules for preventingmoney laundering;

• violations of the Law on Bank DepositGuaranty associated with incorrectly de-termined annual premiums by somebanks;

• cases of legal entities operation as fi-nance brokerage houses without registra-tion as nonbank financial institution withthe BNB. Acts of administrative violationsunder Article 10 and § 4 of the Transi-tional and Final Provisions of RegulationNo. 26 of the BNB and in connection withArticle 3, para. 4 of the Foreign ExchangeLaw were prepared and presented to fourlegal entities.

Based on the findings established as a resultof conducted inspections, reports containingrecommendations and terms for removal ofbreaches were prepared and presented to themanagement bodies of violating banks and fi-nance brokerage houses.

Following an examination and analysis ofthe filed documents, eight legal entities were is-sued permits to conduct transactions in foreigncurrency pursuant to Article 3 of the Foreign Ex-change Law and Regulation No. 26 of the BNB.

During the first half of 2003 control overcompliance with Article 19c of the Law onBanks, and the related revision of databases onshareholder equity interest in bank capital, hasbeen tightened.

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VI.

Research


BNB research ranges over a variety of Bul-garian economic issues, including specialist re-search in important areas such as the real sec-tor, banking, the financial markets, and the la-bor market.

Analyses of trends in international and do-mestic conditions support macroeconomic pro-jections on Bulgarian economic developmentprepared by the BNB. In the spring of 2003 aBNB representative took part in the EuropeanCommission’s presentation of world economicdevelopment projections and set out the majorassumptions and outcomes of BNB forecastsfor Bulgarian economic development in the2003–2006 period.

At the government’s invitation the BNB ac-tively participates in discussions on Bulgaria’smacroeconomic framework, as well as on spe-cific economic policy issues. Jointly with thegovernment, the central bank is developing thePreaccession Economic Program for presenta-tion to the European Commission. This docu-ment is a precursor of convergence programs(for EU member countries which have notadopted the single currency), and of future sta-bility programs (for EU member countrieswhich have adopted the single currency). ThePreaccession Economic Program prepared bythe Bulgarian authorities helps the EuropeanCommission assess Bulgarian progress inimplementing economic policy, as well as thenation’s overall economic development.

In June 2003 the BNB organized the Mon-etary Policy Efficiency and Monetary Substitu-tion international conference for the Balkancountries’ central banks. The special guests,Prof Fabrizio Coricelli (the University of Sienna,the Central European University in Hungary,and the Center for Economic Policy Research)

and Prof Franz Seits (the University of AppliedSciences at Amberg-Weiden in Germany) pre-sented the main papers: Efficiency of the Mon-etary Policy under Different Regimes and theCurrency Substitution Issue, and The Demandfor Currency: a Theoretical Model and EmpiricalResults for Euro Area Currencies.

Representatives of the European CentralBank and the central banks of Albania, Bosniaand Herzegovina, Greece, Romania, Serbia andTurkey took part in the conference. Presentedpapers review the degree of currency substitu-tion in some of the countries of this region, fac-tors in currency substitution, and its effect onmonetary policy.

The second international conference orga-nized by the BNB for Balkan countries’ centralbanks, Productivity, Investment, Growth, will beheld in May 2004. Prof Dale Jorgenson(Harvard, USA) and Prof Alfredo Canavese(Buenos Aires University) will present the mainpapers as guests of the conference. Prof DaleJorgenson teaches at the Department of Eco-nomics at Harvard. He has made widespreadcontributions to economic theory and econo-metrics, and is widely known for his research ininvestment and labor productivity. AlfredoCanavese is a professor in microeconomics andindustrial organization at Buenos Aires Univer-sity. Between 1995 and 1998 he visited Bulgariaon several occasions as consultant to theAgency for Economic Analysis and Forecasting.

Specialist research at the BNB addresses awide range of issues.39 The analysis on Model-ling Inflation in Bulgaria by Kalin Hristov andMihail Mihailov was published in 2003. Thestudy aimed at developing a model of pricelevel dynamics which can be used for short andlong-term inflation forecasting. The study rests

39 Discussion Papers are available on BNB web site.

81RRRRReeeeesesesesesearcarcarcarcarchhhhh

on the markup model of inflation which ex-presses prices as a markup over unit costs. Theimportance of the major domestic and externalfactors determining price level dynamics in Bul-garia (the prices of oil and imported nonenergycommodities, exchange rates, unit labor costs,and the output gap) is considered. Forecastingproperties of the model are examined through

40 The Visiting Researcher Program for the first six months of 2004 is on BNB web site.

out-of-sample estimates. Though risks stem-ming from the short sample period should beborne in mind, results imply that the modelcould be successful in producing short and me-dium-term inflation forecasts.

With a view to broadening the scope of BNBresearch and extending the analyses, a VisitingResearcher Program was launched.40


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VII.

European Integration andInternational Activity


1.European Integration

BNB priorities in the negotiations for Bulgar-ian accession to the European Union includecreating a banking sector legal framework inline with European requirements, liberalizingcapital movement, developing settlement sys-tems, forming the institutional capacity toimplement the legal framework, adopting EUcountries’ central bank practices, and preparingthe Bank for European System of Central Banksmembership. In the first half of 2003 harmoniz-ing legislation with acquis communautaire em-phasized cross-border payments and liberaliz-ing capital movement.

By end-June 2003 the Bulgarian govern-ment declared its standpoints and negotiationsopened on all 30 chapters of the EU Member-ship Treaty at an intergovernmental confer-ence on Bulgarian accession. Negotiations on24 chapters had closed ahead of schedule. TheBNB was involved in the negotiations on theFreedom to Provide Services, Free Movementof Capital and Economic and Monetary Policychapters (temporarily closed). On these chap-ters obligations were assumed to harmonizenational legislation with EU acquiscommunautaire and implement it as of thedate of Bulgaria’s accession to the EU.

BNB experts took part in the April regular sit-ting of Subcommittee 4, Economic and ForeignExchange Issues, Movement of Capital and Sta-tistics, held in Sofia. Issues on the current stateof the Bulgarian economy and its prospectswere discussed at the meetings.

BNB experts were involved in the successive

sitting of Subcommittee 2, The Domestic Mar-ket, also held in April within the negotiationsprocess. The Subcommittee’s review notedBulgaria’s progress in harmonizing bankingsector legislation with the EU law, as well as itsapplication in compliance with EU standardsand practice.

In June 2003 the report on the EU review offinancial services supervision carried out in No-vember 2002 was finalized and approved by ateam of experts from EU member states finan-cial services supervisory institutions. On the ba-sis of report-recommended measures to thebanking sector, supervision action plans weredrawn for the period up to 2006, including regu-latory changes and practical steps in accor-dance with recommendations. Action plans areconcentrated in two major directions: compre-hensive market risk reporting in line with banks’capital adequacy, and preparation and adoptionof capital adequacy requirements in compliancewith the new Basle Capital Accord II drafted bythe Basle Committee on Bank Supervision. Theaction plans were presented at the Ninth Ple-nary Experts Meeting on EU Accession Coun-tries’ Financial Services Supervision Effective-ness.

At the meeting of Working Group 11, Eco-nomic and Monetary Union, held in July,amendments to Bulgaria’s 2003 PreaccessionProgram were discussed. BNB representativestook part in the discussions of the Monetaryand Exchange Rate Policy and Banking Sectorsections of the 2003 Preaccession Program.

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2.Relations with Central Banks

In the first half of 2003 a priority of the Inter-national Relations and European Integration Di-rectorate of the BNB was the implementation ofthe twinning covenant Strengthening the Insti-tutional Capacity of the Central Bank with theBanque de France and De Nederlandsche Bank.The twinning between the two EU banks andthe BNB will last 24 months.

The partnership between the three centralbanks aims to prepare the Bulgarian NationalBank and the Bulgarian banking sector forsmooth accession to, and full integration in, theEU financial system. The Banque de France pro-vides expert assistance in the fields of mon-etary and balance of payments statistics, inter-nal audit and payment and accounting systems.De Nederlandsche Bank participates in the bank

supervision, and risk and human resourcesmanagement fields.

By June 2003 the legal framework of bankingsupervision, accounting, settlement systemsand balance of payments was inspected; stan-dards and practice, applied by the BNB to ac-counting, settlement systems, monetary andbanking statistics, balance of payments statis-tics, risk management, issuing policies, internalaudit, human resources, and information tech-nologies were evaluated. As a result, recom-mendations were made with a view to improv-ing efficiency and achieving complete harmoni-zation of Bulgarian legislation with the EU law.The twinning covenant involves seminars on,inter alia, banking supervision, the EuropeanMonetary Union, human resources.


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VIII.

Bulgarian National Bank GroupConsolidated InterimFinancial Statements

(Unaudited)


Statement of Responsibilitiesof the Managing Board of the Bulgarian National Bank

The Law on the Bulgarian National Bank requires the Managing Board of the Bul-

garian National Bank to prepare financial statements for each reporting period to present

the financial position of the Bulgarian National Bank and the profit or loss for the period.

The financial statements prepared by the Bulgarian National Bank are based on the

accounting principles approved by the Managing Board in compliance with International

Financial Reporting Standards (formerly IAS’s).

The Managing Board of the Bulgarian National Bank is responsible for maintaining

proper accounting records, which disclose with reasonable accuracy at any time the

financial position of the Bulgarian National Bank. It has a general responsibility for

taking such steps as are reasonably open to it to safeguard the assets of the Bulgarian

National Bank and to prevent or detect fraud and other irregularities.

Ivan IskrovGovernor of the BNB

1.

Consolidated Interim Financial Statements


Consolidated Income Statement for the Six Months to 30 June 2003(Unaudited)

Note 30 June 2003 30 June 2002

BGN’000 BGN’000

Interest and similar income

Interest expense and similar charges

Net interest income

Fee and commission income

Fee and commission expense

Net fee and commission expense

Other net trading income

Other operating income

Total income from banking operations

General administrative expenses

Net income from banking operations

Transfer to special reserves

Net income from banking and subsidiaries’

operations after special reserve transfer

The income statement is to be read in conjunction with the notes set out on pages 93 to 108 forming an integral part ofthe unaudited financial statements.

7 142,732 121,250

7 (31,033) (30,312)

111,699 90,938

1,606 1,243

(1,323) (1,339)

283 (96)

8 23,028 12,384

9 7,029 2,128

142,039 105,354

10 (24,024) (18,612)

118,015 86,742

3,936 11,324

121,951 98,066

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200390Consolidated Statement of Recognized Gains and Losses

(Unaudited)


BGN’000 BGN’000

Impairment loss recognized against

revaluation reserve

Revaluation of noncurrent assets

Net gain/(loss) not recognized

in the income statement

Transfer to special reserves

Total recognized gains and losses

The accompanying notes on pages 93 to 108 form an integral part of these unaudited financial statements.

- -

- -

25 121,951 98,066

121,951 98,066


11 1,609,609 1,319,215

12 761,594 828,797

13 7,135,296 6,877,502

15 1,537,539 1,642,948

14 1,856,477 1,937,943

16 174,132 176,035

17 33,726 31,454

13,108,373 12,813,894

22 3,617,677 3,627,928

18 686,051 814,091

19 3,870,892 3,200,163

20 1,456,518 1,556,968

21 1,856,499 1,977,930

23 7,118 8,401

11,494,755 11,185,481

24 20,000 20,000

25 1,593,618 1,608,413

1,613,618 1,628,413

13,108,373 12,813,894

Consolidated Balance Sheet as at 30 June 2003(Unaudited)

Note 30 June 2003 31 December 2002

BGN’000 BGN’000

ASSETS

Cash and deposits in foreign currencies

Gold, instruments in gold and

other precious metals

Debt securities

Equity investments and quota in IMF

Receivable from the Republic of Bulgaria

Property and equipment

Other assets

Total assets

LIABILITIES

Banknotes and coins in circulation

Due to banks and other financial institutions

Liabilities to government institutions

and other borrowings

Borrowings against Republic of

Bulgaria's IMF participation

Borrowings from general resources of IMF

Accruals and other liabilities

Total liabilities

EQUITY

Capital

Reserves

Total equity

Total liabilities and equity

The Managing Board of the BNB approved the unaudited financial statements set out on pages88 to 108 on 18 December 2003.

Ivan IskrovGovernor of the BNB

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200392Consolidated Statement of Cash Flows

(Unaudited)


BGN’000 BGN’000

Net cash flow from operating activitiesNet income from banking operationsAdjustment for noncash and nonoperating items:Depreciation(Profit) on disposal of noncurrent assetsDonation of noncurrent assetsOther noncash itemsExchange (gains) on working capitalNet cash flow from operating activitiesbefore changes in operating assets and liabilitiesChange in operating assets(Increase)/decrease in gold and other precious metals(Increase)/decrease in securities(Increase)/decrease in receivable from government(Increase)/decrease in other assetsChange in operating liabilitiesIncrease/(decrease) in due to banks andother financial institutionsIncrease/(decrease) in government depositsand current accountsIncrease/(decrease) in borrowings from IMFIncrease in currency in circulationIncrease/(decrease) in accruals and other liabilities

Net cash flow from operating activities

Cash flow from investing activitiesPurchase/sale of noncurrent assetsDividends receivedProceeds from sale of noncurrent assets

Net cash flow from investing activities

Cash flow from financing activitiesPayment to government

Net cash flow from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The accompanying notes on pages 93 to 108 form an integral part of these unaudited financial statements.

118,015 86,742

10,,16 5,847 5,167111 (80)

- -- -

56,821 12,833

180,794 104,662

6,135 1,801(319,201) (332,534)

(46,810) 161,931(2,269) (2,471)

(109,051) (109,678)

728,804 473,6518,139 (220,860)

(10,251) (240,141)(1,180) 906

435,111 (162,733)

(4,420) (2,049)- -

117 50

(4,303) (1,999)

(132,562) (172,798)

(132,562) (172,798)

298,246 (337,530)

1,319,215 1,679,746

11, 17 1,617,461 1,342,216


Notes to the Consolidated Financial Statements

1. Statute and principal activitiesThe Bulgarian National Bank (the ‘Bank’) is 100% owned by the Republic of Bulgaria.The Bank is the central bank of the Republic of Bulgaria. The operation of the Bank is governed by the

Law on the Bulgarian National Bank, which has been effective from 10 June 1997.Under this law, the primary objectives of the Bank may be summarized as:• maintaining the stability of the national currency;• the exclusive right to issue banknotes and coins; and• regulation and supervision of other banks’ activities.

The principal operations as a result of this law may be summarized as:• the Bank may not provide credit to the state or to state-owned institutions other than credit for pur-

chase of Special Drawing Rights from the International Monetary Fund in accordance with terms setby law;

• the Bank may not lend to commercial banks except in the case of liquidity risk threatening to affectthe stability of the banking system;

• the Bank may not deal in Bulgarian government bonds;• the Bank may not issue Bulgarian levs in excess of the Bulgarian levs equivalent of the gross interna-

tional foreign currency reserves;• the Bank must prepare its accounts in accordance with International Financial Reporting Standards

(formerly International Accounting Standards), and• under terms agreed upon with the Minister of Finance, the Bank acts as agent for public debts or for

debts guaranteed by the state. Accordingly, the Bank acts as central depository of government secu-rities.

2. Statement of complianceThe financial statements have been prepared in accordance with International Financial Reporting Stan-

dards (formerly IAS) issued by the International Accounting Standards Board (IASB), and interpretationsissued by the Standing Interpretations Committee of the IASB.

3. Basis of preparationThe financial statements are presented in Bulgarian levs (BGN) rounded to the nearest thousand. They

are prepared under the historical cost convention as modified for by the revaluation of certain assets andliabilities to fair value.

The accounting policies have been consistently applied by the Bank.

4. Basis of consolidation

SubsidiariesSubsidiaries are those enterprises controlled by the Bank. Control exists when the bank has the power,

directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain ben-efits from its activities. The financial statements of the subsidiaries are included in the consolidated finan-cial statements from the date that control commences until the date that control ceases. All receivablesand payables, income and expenses, as well as intragroup profits resulting from transactions betweenGroup companies are eliminated unless they are immaterial. Due to the impact of prior years’ activities ofBNB subsidiaries (BORICA and the State Mint) being immaterial, their accounts as at 30 June 2002 havenot been consolidated or restated.

The BNB subsidiaries (BORICA and the State Mint) have enlarged their activities and the Bank has con-solidated their accounts for 2002.

5. Summary of significant accounting policies

(a) Income recognition

Interest income and expense are recognized in the income statement as they accrue, taking into accountthe effective yield of the asset or an applicable floating rate. Interest income and expense include the am-ortization of any discount or premium or other differences between the initial carrying amount of an inter-est-bearing instrument and its amount at maturity calculated on an effective interest rate basis.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200394Fee and commission income and expenses arise on financial services provided by the Bank and are rec-

ognized when the corresponding service is provided.Net income includes gains and losses arising from disposals and changes in the fair value of financial

assets and liabilities held for trading and available for sale assets.

(b) Financial instruments

(i) ClassificationFor the purposes of measuring the financial instruments subsequent to initial recognition, the Bank clas-

sifies the financial instruments into four categories:Trading instruments are those that the Bank principally holds for the purpose of short-term profit taking.

These include investments that are not designated and effective hedging instruments, and liabilities fromshort-term sales of financial instruments. Trading derivatives in a net receivable position (positive fairvalue), as well as options purchased, if any, are reported as trading assets. All trading derivatives in a netpayable position (negative fair value), as well as options written, if any, are reported as trading liabilities.

Originated loans and receivables are loans and receivables created by the Bank providing money to adebtor other than those created with the intention of short-term profit taking.

Held to maturity assets are financial assets with fixed or determinable payments and fixed maturity thatthe Bank has the intent and ability to hold to maturity.

Available for sale assets are financial assets that are not held for trading purposes, originated by theBank, or held to maturity.

(ii) RecognitionThe Bank recognizes financial assets held for trading, held to maturity and available for sale assets on

settlement date. From the date it commits to purchase the assets, any gains and losses arising fromchanges in fair value of the assets are recognized.

The BNB, in its role as holder of Bulgaria’s international reserves, has the primary objective of maintain-ing a high degree of asset liquidity and underlying quality of such assets. The opportunity is taken tomaximize returns within these overriding constraints, and the whole portfolio is therefore classified as‘available for sale’ in terms of IFRS (formerly IAS).

(iii) MeasurementFinancial instruments are measured initially at cost, including transaction costs.Subsequent to initial recognition, all trading instruments and all available for sale assets are measured

at fair value, except that any instrument that does not have a quoted market price in an active market andwhose fair value cannot be reliably measured is stated at cost, including transaction costs, less impair-ment losses.

All nontrading financial liabilities, originated loans and receivables and held to maturity assets are mea-sured at amortized cost less impairment losses. Amortized cost is calculated on the effective interest ratemethod. Premiums and discounts, including initial transaction costs, are included in the carrying amountof the related instrument and amortized based on the effective interest rate of the instrument.

(iv) Fair value measurement principlesThe fair value of financial instruments is based on their quoted market price at the balance sheet date

without any deduction for transaction costs. If a quoted market price is not available, the fair value of theinstrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based onmanagement’s best estimates and the discount rate is a market related rate at the balance sheet date foran instrument with similar terms and conditions. Where pricing models are used, inputs are based onmarket related measures at the balance sheet date.

The fair value of derivatives, if any, that are not exchange-traded is estimated at the amount that theBank would receive or pay to terminate the contract at the balance sheet date taking into account currentmarket conditions and the current creditworthiness of the counterparties.

(v) Gains and losses on subsequent measurementGains and losses arising from a change in the fair value of trading instruments and those available for

sale are recognized in the income statement and then transferred to a special reserve account as requiredby the Law on BNB.

(vi) DerecognitionA financial asset is derecognized on the value date after the Bank loses control over the contractual

rights that comprise that asset. This occurs when the rights are realized, expire or are surrendered. A fi-nancial liability is derecognized when it is extinguished.


Available for sale assets and assets held for trading that are sold are derecognized and correspondingreceivables from the buyer for the payment are recognized as of the date the Bank commits to sell the as-sets. The Bank uses the specific identification method to determine the gain or loss on derecognition.

(vii) ImpairmentFinancial assets are reviewed at each balance sheet date to determine whether there is objective evi-

dence of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

(c) Gold and other precious metals

Gold and other precious metals are valued at market value based on the official 3 pm London closingBullion Market price at the balance sheet date.

(d) Equity investments

For the purposes of measuring the equity investments subsequent to initial recognition, they are classi-fied as available for sale financial assets. The fair value of these investments is not reliably measurable.Therefore they are stated at cost.

The subsidiaries controlled by the Bank included in the financial statements are consolidated.Equity investments in Bulgarian institutions which are regarded as associates have been included at

cost as any adjustments under the equity method are not considered material in the context of the finan-cial statements taken as a whole.

Details of investments held are set out in note 15.

(e) Property and equipment

Property and equipment are stated in the balance sheet at their purchase cost as modified by any re-valuation, less accumulated depreciation and impairment losses.

(i) Subsequent expenditureExpenditure incurred to replace a component of an item of property, plant and equipment that is ac-

counted for separately is capitalized. Other subsequent expenditure is capitalized only when it increasesthe future economic benefits embodied in the item of property, plant and equipment. All other expendi-ture is recognized in the income statement as an expense as incurred.

(ii) DepreciationDepreciation is charged to the income statement on a straight-line basis over the estimated useful lives

of items of property, plant and equipment. Land is not depreciated. The depreciation rates used are asfollows:

(%)

Buildings 2 – 4Equipment 4 − 20Computers 15 − 34Fixtures and fittings 15 − 20Motor vehicles 8 − 20Intangible assets 15 − 20

Assets in progress are not depreciated until completed or ready for use.(iii) Calculation of recoverable amountThe recoverable amount of the Bank’s property plant and equipment is the greater of the net selling

price and value in use. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using the Bank’s incremental borrowing rate that reflects current market assessments of thetime value of money and the risks specific to the asset. For an asset that does not generate largely inde-pendent cash inflows, the recoverable amount is determined for the cash-generating unit to which theasset belongs.

(iv) Reversals of impairmentIn respect of property, plant and equipment, an impairment loss is reversed if there has been a change

in the estimates used to determine the recoverable amount. An impairment loss is reversed only to theextent that the asset’s carrying amount does not exceed the carrying amount that would have been deter-mined, net of depreciation or amortization, had no impairment loss been recognized.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200396(f) Foreign currencies

Income and expenditure arising in foreign currencies is translated to BGN at the official rates of ex-change ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies atthe balance sheet date are translated at the official exchange rate ruling on that day. Foreign exchangegains and losses are recognized in the income statement. Gains and losses are then transferred to or froma special reserve as permitted by the Law on the Bulgarian National Bank, refer note 5 (i) below. Foreigncurrency denominated nonmonetary assets and liabilities are valued at the historical rate at acquisition.

Open forward foreign exchange contracts are valued at market value.The exchange rates of major foreign currencies at 30 June 2003 and 31 December 2002 were:

Currency 30 June 2003 31 December 2002

US Dollar (USD) 1 : BGN 1.71159 1 : BGN 1.88496Euro (EUR) 1 : BGN 1.95583 1 : BGN 1.95583Special Drawing Rights (SDR) 1 : BGN 2.39770 1 : BGN 2.56265Gold (XAU) 1 troy ounce : BGN 591.635 1 troy ounce : BGN 639.048

(g) Taxation

The Bank is not subject to income tax on revenues from its main activities.Tax on the profit from subsidiaries for the period comprises current tax and the change in deferred tax.

For the subsidiaries, current tax comprises tax payable calculated on the basis of the expected taxable in-come for the period, using the tax rates enacted by the balance sheet date. Deferred tax is provided usingthe balance sheet liability method on all temporary differences between the carrying amounts for finan-cial reporting purposes and the amounts used for taxation purposes.

(h) Loans from International Monetary Fund (IMF)

The borrowings from the IMF are denominated in Special Drawing Rights (SDR). Any unrealized ex-change gains or losses are accounted for in accordance with note 5(i).

(i) Capital and reserves

Capital represents nondistributable capital of the Bank.In accordance with the Law on the Bulgarian National Bank, the Bank is required to transfer to Reserves

25% of the annual excess of revenue over expenditure. Special reserves are established as follows: thenet gains and losses arising from the revaluation of assets and liabilities denominated in foreign curren-cies or gold; or upon a decision of the Managing Board.

After transfers to reserves, the balance of the revenue over expenditure is credited to the account of thestate budget. In accordance with IFRS 10, Events after the balance sheet date, this contribution is treatedas a dividend payment to the state and held in a reserve account until paid.

(j) Cash and deposits in foreign currency

Cash and cash equivalents consist of cash in hand, current accounts and term deposits with maturitiesof less than three months.

(k) Comparative information

Where necessary, comparative information has been disclosed to achieve consistency with current fi-nancial year amounts and other disclosures.

6. Acquisition of subsidiariesFollowing a decision of the Managing Board of the Bulgarian National Bank, the capital of the State Mint

has been increased by BGN 1,100 thousand.


7. Interest income and expense(BGN’000)

30 June 2003 30 June 2002Interest and similar income - in BGN 1 10 - in foreign currencies 142,731 121,240

142,732 121,250Interest and similar expense - in BGN 14,925 13,136 - in foreign currencies 16,108 17,176

31,033 30,312

8. Other net income(BGN’000)

30 June 2003 30 June 2002

Net gains from operations in securities 24,433 23,314Net gains from operations in foreign currency 3 ,021 983Net gains from operations in precious metals 0 0Net revaluation of securities 61,407 (20,739)Net revaluation of foreign currency assets and liabilities (4,765) (9,923)Net revaluation of gold and precious metals (61,068) 18,749

23,028 12,384

9. Other operating income(BGN’000)

30 June 2003 30 June 2002

Disposal of noncurrent assets - 95Sales of subsidiaries 6,487 489Sale of coins 219 289Dividend income - -Other income, net 323 1,255

7,029 2,128

In the reporting period, net income of subsidiaries comprised BGN 1,361 thousand of BORICA; net lossof BGN 11 thousand of the State Mint and BGN 1,942 thousand of the Printing Works.

10. General administrative expenses(BGN’000)

30 June 2003 30 June 2002

Personnel costs 8,223 5,927Administration 9,722 9,378Depreciation 5,847 2,963Other expenses 232 344Revaluation of commemorative coins for sale - -Gifting of branch property and equipment - -

24,024 18,612

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200398Personnel costs include salaries, social and health security under the provision of local legislation as at

30 June 2003. The number of employees of the BNB Group was 1,218 including BNB staff of 915.General administrative expenses include the administrative expenses of the BNB. The BNB personnel

costs amount to BGN 6,224 thousand, the BNB administrative expenses were BGN 8,064 thousand andthe BNB depreciation totaled BGN 3,063 thousand.

In the reporting period, the BNB paid BGN 1,614 thousand to the Printing Works for the banknote pro-duction and BGN 416 thousand to the State Mint for the coin production.

11. Cash and deposits in foreign currencies(BGN’000)

30 June 2003 31 December 2002

Foreign currency cash 27,178 6,483Current accounts with other banks 129,697 62,672Deposits in foreign currency 1,452,734 1,250,060

1,609,609 1,319,215

12. Gold, instruments in gold and other precious metals

30.VI.2003 30.VI.2003 31.XII.2002 31.XII.2002

Troy ounces’000 BGN’000 Troy ounces’000 BGN’000

Gold bullion in standard form 513 303,534 513 328,019Gold deposits in standard form 609 360,299 609 389,014Gold in other form - 3,259 - 3,587Other precious metals - 28 - 6,132Other instruments in gold 160 94,474 160 102,045

761,594 828,797

Gold deposits in standard form include gold held with correspondents. This gold earns interest at ratesbetween 0.05% and 0.21% per annum.

The other instruments denominated in gold are held to maturity and earn interest between 1.00% and1.31% per annum.

13. Debt securities(BGN’000)


Securities available for saleForeign treasury bills, notes and bonds 7,135,296 6,877,502

Securities held for tradingForeign treasury bills - -

7,135,296 6,877,502

Debt securities comprise both EUR- and USD-denominated coupon and discount securities. The EUR-denominated securities earn average interest of 5.16% and securities in USD earn average interest of5.04%.

14. Receivable from the Republic of BulgariaThe value of the receivable from the Government of the Republic of Bulgaria at 30 June 2003 is

SDR 774,274 thousand (2002: SDR 756,226 thousand).


The receivable bears interest at the same rates as those incurred on the borrowings from the IMF and isrepayable as follows:

(BGN’000)

Year 30 June 2003 31 December 2002

2003 65,023 156,5032004 169,522 181,1852005 274,261 293,1292006 390,473 375,6932007 369,494 328,2842008 274,185 268,0622009 188,108 201,0482010 104,508 111,6972011 20,904 22,342

1,856,477 1,937,943

15. Equity investments and quota in IMF(BGN’000)


Republic of Bulgaria’s quota in IMF 1,535,073 1,640,483Equity investments in international financial institutions 832 832Equity investments in associated companies 1,634 1,633

1,537,539 1,642,948

BGN 78,593 thousand of the Republic of Bulgaria’s quota in IMF represents the reserve tranche heldwith the IMF. The IMF pays remuneration (interest) to those members who have a remunerated reservetranche position at 1.5% – 1.91% annual floating rate paid quarterly.

The equity investments in international financial institutions include the equity investment in theBank for International Settlements (BIS), Basle.

Following a decision of BIS, Basle Board of Governors, as of 1 April 2003, the BIS’s authorized capital isdenominated in special drawing rights (SDR). The bank holds 8,000 shares of the capital of BIS, Basleeach amounting to SDR 5,000. 25% of the equity investment in BIS, Basle are paid up. The current valueof these shares is SDR 10,000 thousand (ref. note 29).

The capital subscribed but not paid in is with an option to be paid in within three months from the Boardof Governors’ decision.

None of the equity investments in international financial institutions exceeds 10% of the issued sharecapital of those entities. The significant equity investments in Bulgarian institutions may be analyzed asfollows:

Name of institution Holding, % Principal activity

Associated companiesBankservice 36 Interbank clearingInternational Bank Institute 42 Financial training and researchCentral Depository 20 Agent for corporate securities

For valuation purposes, the local equity investments are classified as assets available for sale.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200310016. Property and equipment

(BGN’000)Land and Equip- Motor Fixtures and Assets in Other Intangible Totalbuildings ment vehicles fittings progress assets

Cost or valuationAt 1 January 2003 114,356 68,847 3,349 4,271 4,274 146 3,558 198,801Additions 27 1,252 - 25 2,958 18 140 4,420Disposals (68) (493) - (27) (24) (6) (21) (639)Transfers - 451 - 14 (923) 253 205 -

At 30 June 2003 114,315 70,057 3,349 4,283 6,285 411 3,882 202,582

Depreciation and impairmentAt 1 January 2003 (1,007) (17,172) (1,881) (1,674) - (21) (1,011) (22,776)Charge for the period (1,492) (3,603) (181) (257) - (24) (290) (5,847)On disposals 1 136 1 15 - 6 4 163

At 30 June 2003 (2,498) (20,639) (2,061) (1,916) - (39) (1,297) (28,450)

Net book value at30 June 2003 111,817 49,418 1,288 2,367 6,285 372 2,585 174,132

Net book value at31 December 2002 113,349 51,675 1,468 2,597 4,274 125 2,547 176,035

17. Other assets(BGN’000)


Balances with local banks 33 40Balances of subsidiaries held with local banks 7,852 9,945Precious metal commemorative coins for sale 11,222 11,315Inventories (including spare parts) 8,639 7,071Accounts receivable 1,617 1,273Prepaid expenses 934 705Other 3,429 1,105

33,726 31,454

Commemorative coin holdings were revalued on the basis of the market value of the incorporate pre-cious metal content.

18. Due to banks and other financial institutions(BGN’000)


Demand deposits from banksand other financial institutions- in BGN 355,395 594,553- in foreign currencies 330,656 219,538

686,051 814,091

The Bank does not pay interest on demand deposits from banks and other financial institutions. In-cluded in demand deposits is BGN 304,391 thousand representing the obligatory reserves, which all localbanks are required to maintain with the Bank as part of their current accounts.


19. Liabilities to government institutions and other borrowings(BGN’000)


Current accounts- in BGN 352,155 296,995- in foreign currencies 295,492 183,000

Deposit accounts- in BGN 1,606,430 1,080,404- in foreign currencies 1,616,816 1,639,764

3,870,893 3,200,163

Deposits and current accounts of government institutions with the Bank comprise funds held on behalfof the Government of the Republic of Bulgaria and state budget organizations. No interest is payable onthe current accounts. Government deposit accounts in USD earn interest between 0.60% and 1.99%. Gov-ernment deposit accounts in EUR earn interest between 1.82 % and 2.53% and in BGN earn interest be-tween 1.74% and 2.86%.

20. Borrowings against the Republic of Bulgaria’s IMF participationThe borrowings against Bulgaria’s IMF participation as at 30 June 2003 amount to SDR 605,821 thousand

(31 December 2002: SDR 605,821 thousand).

21. Borrowings from general resources of the IMF(BGN’000)


Standby facilities 326,087 295,098Extended fund facility 1,483,967 1,608,371Systematic transformation facility 46,445 74,461

1,856,499 1,977,930

Borrowings from the IMF are denominated in SDRs. Borrowings related to Bulgaria’s IMF quota arenoninterest-bearing with no stated maturity, while borrowings from the general resources of IMF bear in-terest at rates set by the IMF on a weekly basis and are repayable according to the repayment schedulesof the agreements. The interest rate amounts to 2.01% as at 30 June 2003.

Borrowings from the IMF are guaranteed by promissory notes, which have been cosigned by the Gov-ernment and the Bank. The total promissory notes outstanding as at 30 June 2003 were BGN 3,355,936thousand (31 December 2002: BGN 3,791,706 thousand), ref. note 29.

22. Banknotes and coins in circulation(BGN’000)


Banknotes in circulation 3,560,033 3,579,526Coins in circulation 57,644 48,402Money in circulation 3,617,677 3,627,928Including: Old banknotes issued before 5 July 1999 14,259 14,435 Old coins issued before 5 July 1999 3,698 3,699

Old banknotes and coins presented above comprise of those banknotes and coins that are still held byother parties or lost/destroyed and have not yet been exchanged for new levs. The BNB has an obligationto exchange them for new banknotes and coins. No deadline for the cessation of the exchange has beendetermined.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200310223. Accruals and other liabilities

(BGN’000)


Salaries and social security payable 472 765Deferred income 70 150Other payables 6,576 7,486

7,118 8,401

24. CapitalThe capital of the Bank is determined in the Law on the BNB and amounts to BGN 20,000 thousand.

25. Reserves

Movement in reserves for the six months ended 30 June 2003

(BGN’000)

Noncurrent Monetary Commemorative Other Totalasset asset coin reserves

revaluation revaluation revaluationreserve reserve reserve

Balance at 1 January 2003 84,768 956,262 11,344 556,039 1,608,413Transfer of unrealized gold revaluation gain - (61,068) - - (61,068)Transfer of net foreign exchange losses - (4,765) - - (4,765)Transfer of net revaluation of securities - 61,407 - - 61,407Other transfers (124) - (122) 490 243Donation of noncurrent assets (2) (2)Revaluation of commemorative coins - - -Payment of the prior year contributionto the budget of Republic of Bulgaria - - - (132,562) (132,562)Net income from banking and subsidiaries’operations after transfer to special reserve - - - 121,951 121,951

Balance at 30 June 2003 84,642 951,836 11,222 545,918 1,593,618

Movement in reserves for the six months ended 30 June 2002

(BGN’000)

Noncurrent Monetary Commemorative Other Totalasset asset coin reserves

revaluation revaluation revaluationreserve reserve reserve

Balance at 1 January 2002 16,130 771,732 18,179 547,604 1,353,645Transfer of unrealized gold revaluation gain - 7,601 - - 7,601Transfer of realized precious metal revaluation gain - 11,147 - - 11,147Transfer of net foreign exchange losses - (9,923) - - (9,923)Transfer of net revaluation of securities - (20,739) - - (20,739)Other transfers (40) - (130) 590 420

Revaluation of commemorative coins - - - - -Payment of the prior year contribution tothe budget of Republic of Bulgaria - - - (172,798) (172,798)Net income from banking and subsidiaries’operations after transfer to special reserve - - - 98,066 98,066

Balance at 30 June 2002 16,090 759,818 18,049 473,462 1,267,419


26. Monetary liabilities and gross international foreign exchange reserves(BGN’000)


Gross international foreign exchange reservesCash and deposits in foreign currencies 1,607,867 1,317,940Gold and other precious metals 758,288 640,858Debt securities 6,976,889 6,722,210Equity investments and quota in IMF 78,593 83,999Interest receivable 160,168 156,622

9,581,805 8,921,629Monetary liabilitiesBanknotes and coins in circulation 3,617,677 3,627,928Due to banks and other financial institutions 686,051 814,091Liabilities to government institutions 3,774,483 3,034,849Other borrowings 95,795 163,056Accruals and other liabilities 946 2,595

8,174,952 7,642,519

Surplus of Gross International Foreign ExchangeReserves over Monetary Liabilities 1,406,853 1,279,110

For disclosure purposes of the monetary liabilities and gross international foreign exchange reserves inaccordance with the Law on the Bulgarian National Bank, monetary gold is valued at the lower ofBGN 500 (EUR 255.64 equal) per troy ounce or market value based on the official 3 pm London BullionMarket closing price on the last business day in that market closest to BNB balance sheet date.

27. Related party transactions

i) Bulgarian Government

International Monetary FundThe Bank and the Government of the Republic of Bulgaria have borrowings with the IMF, which are un-

dertaken through the Bank. The Government’s IMF borrowings, as shown on the balance sheet of theBank, have been matched by a receivable from the Government. In order for the Bank to eliminate anyforeign exchange risk, the Government receivable is denominated in SDR.

The Government pays the interest on these borrowings. Accordingly, no interest revenue is included inthese accounts for the receivable from the Government, nor is interest expense included on theGovernment’s portion of the IMF borrowings.

The IMF quota is supported by promissory notes jointly signed by the Bank and the Government (ref.note 21).

Government bank accountsGovernment budget organizations and other government organizations have current accounts and term

deposits with the Bank (ref. note 19).

ii) Group enterprises

Control over the BNB GroupThe Bulgarian National Bank is a parent company in the BNB’s Group.Subsidiaries

(%)

Ownership interest 30 June 2003 31 December 2002

BORICA 100 100State Mint 100 100Printing Works of BNB 100 100

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 200310428. Risk management disclosures

In the process of managing Bulgaria’s foreign currency reserves, the BNB maintains trading positions infixed-income securities and short-term deposits in foreign currency and gold. For the purpose of its activi-ties the Bank carries an inventory of capital market instruments with the primary objective of access to li-quidity and acquiring only high quality assets, to ensure all foreign currency payments. The Bank doesnot maintain positions in derivative instruments. The Bank’s investment strategy depends mainly on thespecific function of a central bank operating under a currency board arrangement. The Bank manages itsportfolios by defining acceptable risk levels and maximizing income at these levels. The major risk typesassociated with trading and investment activities are managed by means of investment limits and proce-dures, which are approved by the BNB Investment Committee and relate to the management of theBank’s foreign exchange assets.

A description of the various types of risks, the Bank is exposed to as a result of its trading and nontrad-ing activities and the approach taken to manage those risks, is included below. Further details of the stepstaken to measure and control risk are set out in section (e) Risk management and control of this note.

(a) Credit risk

The Bank is subject to credit risk through its trading and investment activities and in cases where it actsas an intermediary on behalf of the Government or other public institutions. This credit risk is basicallyassociated with the risk of insolvency or bankruptcy of a BNB’s counterparty or debt issuer, in which theBank has invested own funds.

The Bank also faces credit risk stemming from a substantial concentration of funds invested in some ofthe following asset classes issued by commercial banks, supranational financial institutions, or govern-ment agencies. To minimize this risk the Bank has set limits on exposures to each of those asset classes.

The Bank has set in place limits on exposures to individual counterparties, which it monitors on a dailybasis. A limit depends on the credit rating and the own funds of the counterparty. To minimize credit riskthe Bank deals only with financial institutions, which are assigned one of the two highest credit ratings byinternationally acknowledged credit rating agencies. In keeping with the Bank’s requirements the abovementioned counterparties and issuers are evaluated by at least two international rating agencies.

(b) Liquidity risk

Liquidity risk arises in the funding of the Bank’s core activities and in the management of positions, andis two-dimensional:

• the risk for the Bank of being unable to meet its obligations when due, and• the risk of being unable to liquidate an asset at a fair value within an appropriate time frame.

The Bank raises funds using a range of instruments including deposit/investment accounts, structuredindex account (SIA), settlement accounts and other attracted funds regulated by law. The Bank strives tomaintain a balance between the timing of attracted funds and that of assets through investments in finan-cial instruments with a range of maturities. The Bank has set limits to ensure minimum liquidity by typeof currency. This liquidity is provided on a daily basis, thus ensuring all BNB foreign currency payments.In addition, there are limits on the residual term to maturity for the financial instruments of those assetclasses approved for investment. The Bank continually assesses liquidity risk by identifying and monitor-ing changes in funding required to meet its goals and targets set in terms of the overall Bank strategy. Toensure its future payments the Bank holds portfolios of liquid assets denominated in euro and US dollarsas part of its overall liquidity risk management strategy.

The following table provides an analysis of the financial assets and liabilities of the Bank into relevantmaturity groupings based on the remaining periods to repayment:


As at 30 June 2003(BGN’000)

Up to From 1 From 3 months From 1 Over Total1 month to 3 months to 1 year to 5 years 5 years

AssetsCash and deposits in foreign currencies 1,374,613 234,996 - - - 1,609,609Gold and other precious metals 212,737 147,562 - 94,474 306,821 761,594Debt securities 223,785 380,276 1,262,490 3,327,056 1,941,689 7,135,296Equity investments and quota in IMF 78,593 - - - 1,458,946 1,537,539Receivable from the Republic of Bulgaria - 20,900 139,636 1,434,692 261,249 1,856,477Property and equipment - - - - 174,132 174,132Other assets 13,305 2,180 18,241 - - 33,726

Total assets 1,903,033 785,914 1,420,367 4,856,222 4,142,837 13,108,373

LiabilitiesBanknotes and coins in circulation - - - - 3,617,677 3,617,677Due to banks and other financial institutions 686,051 - - - - 686,051Liabilities to government institutions and other borrowings 3,849,255 - 21,637 - - 3,870,892Borrowings against Republic of Bulgaria’s IMF participation - - - - 1,456,518 1,456,518Borrowings from general resources of IMF - 20,922 139,636 1,434,692 261,249 1,856,499Accruals and other liabilities 7,118 - - - - 7,118

Total liabilities 4,542,424 20,922 161,273 1,434,692 5,335,444 11,494,755

Maturity surplus/(shortfall) (2,639,391) 764,992 1,259,094 3,421,530 (1,192,607) 1,613,618

As at 31 December 2002(BGN’000)

Up to From 1 From 3 months From 1 Over Total1 month to 3 months to 1 year to 5 years 5 years

AssetsCash and deposits in foreign currencies 1,196,795 122,420 - - - 1,319,215Gold and other precious metals 132,436 262,906 - 102,045 331,410 828,797Debt securities 210,496 522,661 1,102,338 3,020,498 2,021,509 6,877,502Equity investments and quota in IMF 83,999 - - - 1,558,949 1,642,948Receivable from the Republic of Bulgaria - 31,093 125,410 1,178,290 603,150 1,937,943Property and equipment - - - - 176,035 176,035Other assets 6,451 3,156 21,847 - - 31,454

Total assets 1,630,177 942,236 1,249,595 4,300,833 4,691,053 12,813,894

LiabilitiesBanknotes and coins in circulation - - - - 3,627,928 3,627,928Due to banks and other financial institutions 814,091 - - - - 814,091Liabilities to government institutions and other borrowings 2,576,855 222,506 400,802 - - 3,200,163Borrowings against Republic of Bulgaria’s IMF participation - - - - 1,556,968 1,556,968Borrowings from general resources of IMF - 51,087 145,403 1,178,290 603,150 1,977,930Accruals and other liabilities 8,401 - - - - 8,401

Total liabilities 3,399,347 273,593 546,205 1,178,290 5,788,046 11,185,481

Maturity surplus/(shortfall) (1,769,170) 668,643 703,390 3,122,543 (1,096,993) 1,628,413

(c) Market risk

Market riskAll trading instruments are subject to market risk, i.e. the risk that future changes in market conditions

may make an instrument less valuable. The instruments are evaluated on a daily basis at fair value and allchanges in market conditions directly affect net trading income.

The Bank manages its portfolios in response to changing market conditions. Exposure to market risk ismanaged in accordance with the risk limits formally set (in the investment guidelines) for managing for-eign currency assets.

Interest rate riskThe Bank’s operations are subject to the risk of interest rate fluctuations to the extent that interest-earn-

ing assets (including investments) and interest-bearing liabilities mature or reprice at different times or in


(BGN’000)

(BGN’000)

different amounts. The Bank uses modified duration as a key measurement for interest rate risk. Modifiedduration measures the effect of the change of the market value of an asset (liability) in response to 1%change of the interest rate levels. For each portfolio held by the BNB the interest rate is limited by abenchmark (model portfolio) and by the investment limits for a maximum allowable deviation of themodified duration of the portfolio from that of the respective benchmark. With regard to assets and liabili-ties with floating interest rates the Bank is exposed to the risk of change in the base, which serves to de-termine interest rates.

The periods of interest rate scale change are given below. The maximum period of all assets and liabili-ties under the scale is one year.

As at 30 June 2003 Total Floating rateinstruments Fixed rate instruments

Less Between Betweenthan 1 month and 3 months

1 month 3 months and 1 yearAssetsCash and deposits in foreign currencies 1,580,683 129,411 1,216,553 234,719 -Gold and other precious metals 454,754 148 212,575 147,557 94,474Debt securities 6,976,889 14,114 216,417 376,722 6,369,636Equity investments and quota in IMF 78,593 78,593 - - -Receivable from the Republic of Bulgaria 1,856,477 1,856,477 - - -Interest-bearing assets 33 33 - - -Noninterest-bearing assets 2,160,944 - - - -

Total 13,108,373 2,078,776 1,645,545 758,998 6,464,110

LiabilitiesBanknotes and coins in circulation - - - - -Due to banks and other financial institutions 686,051 - 686,051 - -Liabilities to government institutions and other borrowings 3,220,355 - 3,198,841 - 21,514Borrowings from general resources of IMF 1,856,477 1,856,477 - - -Noninterest-bearing liabilities 5,731,872 - - - -

Total 11,494,755 1,856,477 3,884,892 - 21,514

Asset/liability gap 1,613,618 222,299 2,239,347 758,998 6,442,596

As at 31 December 2002 Total Floating rateinstruments Fixed rate instruments

Less Between Betweenthan 1 month and 3 months

1 month 3 months and 1 yearAssetsCash and deposits in foreign currencies 1,311,457 62,527 1,126,617 122,313 -Gold and other precious metals 497,317 160 132,233 262,879 102,045Debt securities 6,722,209 9,425 207,768 517,083 5,987,933Equity investments and quota in IMF 83,999 83,999 - - -Receivable from the Republic of Bulgaria 1,937,943 1,937,943 - - -Interest-bearing assets 9,607 - 6,451 3,156 -Noninterest-bearing assets 2,251,362 - - - -

Total 12,813,894 2,094,054 1,473,069 905,431 6,089,978

LiabilitiesBanknotes and coins in circulation - - - - -Due to banks and other financial institutions 814,091 - 814,091 - -Liabilities to government institutionsand other borrowings 2,717,572 - 2,096,058 221,514 400,000Borrowings from general resources of IMF 1,977,730 1,977,730 - - -Noninterest-bearing liabilities 5,676,088 - - - -

Total 11,185,481 1,977,730 2,910,149 221,514 400,000

Asset/liability gap 1,628,413 116,324 (1,437,080) 683,917 5,689,978


(d) Currency risk

Currency risk exists where there is a difference between the currency structure of assets and that of li-abilities. The Bank is exposed to currency risk through transactions with financial instruments denomi-nated in currencies, which differ from the base currency (euro) of the Bank.

As a result of the currency board arrangement in Bulgaria, the Bulgarian currency is fixed to the euro.As the currency in which the Bank presents its financial statements is the Bulgarian lev, the Bank’s finan-cial statements are impacted by movements in the exchange rates between the currencies outside theeuroarea and the lev.

The Bank’s transactions give rise to foreign gains and losses that are recognized in the income state-ment and may then be transferred to special reserves.

To minimize currency risk a limit is set to mismatches between the currency structure of assets and thatof liabilities. The market value of assets in a currency other than the euro should not deviate by more than+/-2% from the market value of liabilities denominated in the same currency.

The foreign currency exposures are as follows:(BGN’000)


Assets

Bulgarian levs and euroarea currencies 8,064,782 7,507,225US dollars 653,289 841,254Japanese yen 43 37Pound sterling 131 53SDR 3,459,435 3,579,963Gold 761,566 822,665Other 169,127 62,697

13,108,373 12,813,894

Liabilities and equity

Bulgarian levs and euroarea currencies 8,950,016 8,392,073US dollars 643,355 831,498Japanese yen - 896Pound sterling 764 4SDR 3,342,271 3,531,931Gold - -Other 171,967 57,492

13,108,373 12,813,894

Net position

Bulgarian levs and euroarea currencies (885,234) (884,848)US dollars 9,934 9,756Japanese yen 43 (859)Pound sterling (633) 49SDR 117,164 48,032Gold 761,566 822,665Other (2,840) 5,205

(e) Risk measurement and control

The above types of risks are managed by an independent risk control division, which prepares and sub-mits for approval the investment limits regarding forex reserves management; and monitors and controlsdaily the compliance with limits, rules, and procedures. For that purpose regular reports are issued on adaily, weekly, monthly, quarterly, and annual basis, designed for both the operational management offorex reserves and to keep the Bank’s management informed. Upon a change in market conditions or inthe risk level tolerance, as approved by BNB Managing Board, the division prepares and recommends tothe Investment Committee an appropriate update of the investment guidelines.

BULBULBULBULBULGARIGARIGARIGARIGARIAAAAAN NAN NAN NAN NAN NATITITITITIOOOOONNNNNAL BAAL BAAL BAAL BAAL BANKNKNKNKNK R R R R Reeeeepopopopoporrrrr ttttt ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003108Interest rate sensitivityThe Bank uses duration analysis to estimate the degree of sensitivity to interest rate changes in its non-

trading positions. Modified duration of a bond is the life, in years, of a notional zero coupon bond whosefair value would change by the same amount as the real bond or portfolio in response to a change in mar-ket interest rates.

29. Commitments and contingencies

(i) Participation in the Bank for International SettlementsThe Bank holds 8,000 shares of the capital of the BIS, Basle, each amounting to SDR 5,000. Twenty-five

percent of the equity investment in BIS, Basle are paid up. The capital subscribed but not paid in is withan option to be paid in within three months after the Board of Governors’ decision. The contingentamount as at 30 June 2003 would have been BGN 73,985 thousand.

(ii) IMF quota and borrowingsThe IMF quota and borrowings are supported by promissory notes jointly signed by the Bank and the

Government of the Republic of Bulgaria amounting to BGN 3,355,936 thousand (2002: BGN 3,791,706thousand).

(iii) Capital commitmentsAs at 30 June 2003, the Bank has committed to BGN 2,385 thousand to purchase noncurrent assets.(iv) Retirement benefits under local legislationIn accordance with the requirements of Labor Code, on termination of the labor contract of an em-

ployee, who has become entitled to retirement, the Bank is obliged to pay him a compensation amount-ing to his double gross monthly salary. If the employee has been employed in the Bank for the last tenyears, the amount of the compensation due is six times his gross monthly salary.

The Bank does not have sufficient statistical information, so as to perform precise actuarial calculations;therefore the management has made an approximate estimation of the compensations due. The approxi-mate amount of the present value of the liabilities for retirement compensations at the balance sheet dateamounts to BGN 671 thousand.

Due to the insufficient data for performing a reliable estimation of the compensations due, no legal ob-ligation for retirement compensations were accrued in these financial statements in accordance with therequirements of IAS 19, Employee benefits.

There are no other outstanding guarantees, letters of credit or commitments to purchase or sell eithergold, other precious metals or foreign currency.

30. Events subsequent to the balance sheet dateThere are no events subsequent to the balance sheet date of such a nature that they would require ad-

ditional disclosures or adjustments to the consolidated financial statements.


BNB operating expenditure between Januaryand June 2003 totaled BGN 17,699,000, ac-counting for 36.9% of annual budgeted expen-diture.

Expenditure on Currency inCirculation

In the first half of 2003 cost incurred on cur-rency in circulation totaled BGN 4,174,000, or31.3% of annual budgeted expenses. Of this,banknote printing amounted to BGN 1,614,000and coin minting (circulating and commemora-tive coins) to BGN 2,118,000. Expenditure onmaterials for banknote and coin processing,spare parts for machines servicing currency incirculation, and for renting premises for the is-suing activities of the Printing Works, was alsoincurred.

Expenditure on Materials, Servicesand Depreciation

Between January and June 2003 expenditureon materials totaled BGN 429,000, or 40.5% ofannual budgeted expenditure. More significantexpenses were for, inter alia, electricity(BGN 135,000), stationery (BGN 139,000), fueland spare parts for the BNB transport fleet(BGN 71,000), and inventories (BGN 44,000).

Expenditure on hired services comprisedBGN 3,461,000, or 34.2% of budgeted funds for2003. More significant expenses were onBloomberg, Reuters, SWIFT and other systems,BGN 523,000, including BGN 191,000 on equip-ment and maintenance, BGN 296,000 on postal,telephone and telex services, BGN 985,000 onthe contract with the Ministry of Internal Affairsfor BNB security, and BGN 271,000 on subscrip-tion charges to Bankservice AD.

Depreciation expenditure amounted toBGN 3,063,000, accounting for 43.4% of annualprojections.

Expenditure on Salaries and EmployeeBenefits

Expenditure on salaries and employee ben-efits totaled BGN 5,168,000, or 39.1% of annualbudgeted expenses.

Social Activity ExpenditureExpenses on social activity amounted to

BGN 1,056,000, accounting for 53% of annualbudgeted funds. Funds were spent on mainte-nance of BNB rest homes, supplementary pen-sion insurance, and enhancement employees’social status.

Other Administrative ExpenditureOther administrative expenditure reported in

the January to June 2003 period totaledBGN 348,000, or 31.2% of projected costs for2003. BNB spent money on travel in Bulgaria(BGN 21,000) and abroad (BGN 193,000), onstaff training at the bank and regional centers,and on labor safety. Representative and proto-col costs of the Bank were also reported underthis indicator.

2.Report on the Implementation of the BNB Budget

STRUCTURE OF BNB OPERATING EXPENDITURE

30 June 2002

30 June 2003

Source: BNB.


IMPLEMENTATION OF THE BNB BUDGET FOR 2003(BGN’000)

Indicators 30 June 2002 30 June 2003

Section I. BNB operating expenditure 19,423 17,699

1. Currency circulation expenditure 5,449 4,174

2. Materials, services and depreciation expenditure 7,703 6,953

3. Salaries and employee benefits 4,886 5,168

4. Social activity expenditure 1,041 1,056

5. Other administrative expenditure 344 348

Section II. Investment program 1,710 3,477

1. Expenditure on construction, reconstruction and modernization 33 492

2. Expenditure on currency circulation equipment 0 0

3. Expenditure on BNB security equipment 40 17

4. Expenditure on BNB computerization 1,451 1,732

5. Office furniture and equipment 186 136

6. Increase in the capital of the State Mint 0 1,100

Investment ExpenditureOver the review period investment expendi-

ture totaled BGN 3,477,000, comprising 22.2%of budgeted funds for 2003. Investment ex-penses were made mostly on BNB computeriza-tion (BGN 1,732,000), including purchase ofhardware (BGN 266,000) and software

Source: BNB.

(BGN 1,466,000). Costs were also incurred onBNB security equipment and office furnitureand equipment.

Funds amounting to BGN 1,100,000 weretransferred to the State Mint for increasingcompany’s capital.

AAAAAppppppepepepepennnnndixdixdixdixdix 111

Appendix

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003112

Gross Domestic Product ........................................................................................................................................ 113Consumer Price Chain Indices by Major Consumer Group ............................................................................ 114Consumer Price Base Indices by Major Consumer Group .............................................................................. 114Exports by Commodity Group ............................................................................................................................. 115Imports by Commodity Group ............................................................................................................................. 117Exports by Major Trading Partner and Region ................................................................................................. 119Imports by Major Trading Partner and Region ................................................................................................. 121Exports by Use ........................................................................................................................................................ 123Imports by Use ........................................................................................................................................................ 125Balance of Payments in USD ................................................................................................................................ 127Balance of Payments in BGN ............................................................................................................................... 129Domestic Government Debt ................................................................................................................................. 131Consolidated State Budget as of 30 June 2003 ................................................................................................ 133Gross Foreign Debt (by debtor) ........................................................................................................................... 134Gross Foreign Debt Service (by debtor) ............................................................................................................ 135Gross Foreign Debt (by creditor) ......................................................................................................................... 136Gross Foreign Debt Service (by creditor) .......................................................................................................... 137New Credits and Deposits ..................................................................................................................................... 138Balance Sheet of the BNB ..................................................................................................................................... 140Monetary Survey .................................................................................................................................................... 141Analytical Reporting of the BNB .......................................................................................................................... 146Analytical Reporting of Commercial Banks ....................................................................................................... 147Monthly Interest Rates .......................................................................................................................................... 152Consolidated Balance Sheet of the Banking System as of June 2003 ......................................................... 153Consolidated Income Statement of the Banking System as of June 2003 .................................................. 155Balance Sheet of Group I Banks as of June 2003............................................................................................. 156Income Statement of Group I Banks as of June 2003 ..................................................................................... 158Balance Sheet of Group II Banks as of June 2003 ........................................................................................... 160Income Statement of Group II Banks as of June 2003 .................................................................................... 162Balance Sheet of Group III Banks as of June 2003 .......................................................................................... 164Income Statement of Group III Banks as of June 2003 ................................................................................... 166Capital Adequacy of the Banking System and by Bank Group as of June 2003 ........................................ 168High-Liquidity Asset Ratios as of 30 June 2003 ............................................................................................... 168Open Foreign Currency Positions of Commercial Banks as of 30 June 2003 ............................................. 168Liquidity of Commercial Banks as of 30 June 2003 ......................................................................................... 169Commercial Bank Claims on Financial Institutions and Credits to Nonfinancial Institutions .................. 170Credit Portfolio of Commercial Banks (Credits to Nonfinancial Institutions) .............................................. 171Major Resolutions of the BNB Managing Board ............................................................................................... 172

The methodology and scope of the respective indicators are comprehensively presented in 2003 BNB Monthly Bulletin issues.

C o n t e n t s


Indicators

2002, BGN’000 2003, BGN’000

Gross value added By economic sector

Agriculture and forestryIndustryServices

By type of ownershipPrivatePublic

Adjustments

Gross domestic product By component of final demand

Final consumptionIndividualCollective

Gross capital formationGross capital formation of fixed capitalReserve change

Balance (exports − imports)Exports of goods and servicesImports of goods and services

Statistical discrepancy

Source: NSI.

Physicalvolumeindex(%)

12 704 723 6 247 343 6 948 647 13 195 990 104.2

1 157 899 408 652 585 610 994 262 99.33 802 399 2 042 751 2 160 113 4 202 864 106.77 744 425 3 795 940 4 202 924 7 998 864 103.6

8 990 669 4 439 251 5 050 550 9 489 801 107.83 714 054 1 808 092 1 898 097 3 706 189 95.6

1 822 290 1 046 841 1 022 416 2 069 257 103.5

14 527 013 7 294 184 7 971 063 15 265 247 104.1

12 935 813 6 739 117 7 222 271 13 961 388 106.511 544 111 6 061 150 6 439 403 12 500 553 107.2

1 391 702 677 967 782 868 1 460 835 101.0

2 804 117 1 248 451 1 780 916 3 029 3672 473 773 1 213 087 1 712 150 2 925 237 118.0

330 344 35 364 68 766 104 130

-1 157 585 -689 400 -1 030 814 -1 720 2147 762 398 3 976 300 4 465 013 8 441 313 112.68 919 983 4 665 700 5 495 827 10 161 527 116.3

-55 332 -3 984 -1 310 -5 294

GROSS DOMESTIC PRODUCT(at current prices)

January − June I quarter II quarter January − June


Consumer groups 2002 2003

Total

Food and nonalcoholic drinks

Alcoholic drinks and tobacco products

Clothing and footwear

Housing (rents, repair and maintenance), water,

electricity, gas and other fuels

Home furniture, household appliances and

accessories

Healthcare

Transportation

Communications

Leisure, entertainment and recreation

Education

Restaurants and hotels

Miscellaneous goods and services

Source: NSI.

100.0 100.6 100.1 100.4 100.3 99.4 97.8

39.7 100.5 100.4 100.6 102.5 99.2 94.6

4.4 100.6 100.1 100.1 100.7 100.0 100.0

4.7 99.6 98.5 99.4 97.4 99.2 99.5

17.0 100.5 99.7 100.0 100.4 99.8 99.9

3.9 99.9 100.0 99.9 99.7 99.9 100.0

5.3 100.8 99.9 104.1 106.4 100.2 99.7

6.7 102.7 100.6 98.9 99.9 96.2 99.0

5.5 101.5 100.1 100.0 101.6 100.0 100.0

3.7 100.3 100.1 100.1 99.8 100.2 102.0

0.6 100.0 100.0 100.1 100.0 99.9 100.3

4.7 101.0 100.5 100.0 102.0 100.4 100.2

4.0 100.2 99.8 100.1 100.7 100.2 99.9

CONSUMER PRICE CHAIN INDICES BY MAJOR CONSUMER GROUP(previous month = 100)

I II III IV V VIShare (%)

Consumer groups 2002 2003

Total

Food and nonalcoholic drinks

Alcoholic drinks and tobacco products

Clothing and footwear

Housing (rents, repair and maintenance), water,

electricity, gas and other fuels

Home furniture, household appliances and

accessories

Healthcare

Transportation

Communications

Leisure, entertainment and recreation

Education

Restaurants and hotels

Miscellaneous goods and services

Source: NSI.

100.0 101.9 102.0 102.4 102.7 102.0 99.8

39.7 99.7 100.2 100.8 101.7 100.9 95.5

4.4 103.8 103.9 103.9 104.0 103.9 103.9

4.7 100.1 98.6 98.0 97.9 97.1 96.6

17.0 106.8 106.5 106.5 106.7 106.4 106.2

3.9 99.6 99.6 99.5 99.3 99.2 99.2

5.3 101.2 101.1 105.2 106.7 106.9 106.6

6.7 106.2 106.9 105.8 103.4 99.4 98.4

5.5 101.2 101.3 101.3 101.3 101.3 101.3

3.7 99.6 99.8 99.9 99.2 99.4 101.4

0.6 103.7 103.6 103.8 103.7 103.7 104.0

4.7 102.1 102.6 102.6 103.1 103.5 103.7

4.0 100.4 100.1 100.3 100.8 101.1 101.0

CONSUMER PRICE BASE INDICES BY MAJOR CONSUMER GROUP(2002 = 100)

I II III IV V VIShare (%)

AAAAAppppppepepepepennnnndixdixdixdixdix 115EXPORTS BY COMMODITY GROUP

426.3 498.5 72.2 16.9 440.4 501.5 61.1 13.9

162.7 189.9 27.2 16.7 146.2 161.2 15.0 10.3120.5 141.3 20.8 17.3 127.9 155.7 27.8 21.8

43.9 48.9 5.0 11.4 41.3 47.1 5.8 14.0

23.3 30.5 7.2 30.7 26.2 33.5 7.3 28.0

220.1 309.9 89.8 40.8 247.0 291.7 44.6 18.182.7 140.0 57.3 69.2 101.9 145.1 43.2 42.472.4 100.0 27.5 38.0 73.5 74.5 1.0 1.420.0 19.5 -0.5 -2.6 22.0 24.9 2.9 13.115.2 21.6 6.4 41.7 17.4 23.4 6.0 34.3

184.5 249.8 65.3 35.4 210.0 236.9 26.9 12.8

91.5 96.0 4.5 4.9 101.6 101.1 -0.5 -0.556.8 85.5 28.6 50.3 63.3 84.3 21.1 33.3

9.4 10.1 0.6 7.0 9.6 12.9 3.4 36.0

167.3 189.6 22.3 13.3 181.1 171.3 -9.8 -5.429.7 30.2 0.5 1.8 30.6 35.9 5.2 17.134.3 33.6 -0.7 -2.1 30.7 31.3 0.5 1.823.1 31.8 8.7 37.6 35.4 27.3 -8.1 -22.919.6 32.5 12.9 66.0 14.6 13.4 -1.3 -8.817.2 18.5 1.3 7.7 19.5 19.9 0.4 2.218.7 18.6 0.0 -0.2 18.4 14.8 -3.7 -19.9

151.0 155.4 4.4 2.9 170.6 167.5 -3.1 -1.8133.9 139.1 5.2 3.9 144.1 144.8 0.7 0.5

147.9 159.6 11.7 7.9 142.6 153.5 10.9 7.731.2 27.7 -3.5 -11.1 22.1 14.9 -7.2 -32.515.9 33.7 17.8 112.2 13.0 9.8 -3.2 -24.417.9 16.0 -1.9 -10.8 20.2 19.1 -1.0 -5.2

59.8 70.3 10.4 17.5 79.1 91.4 12.3 15.5

21.9 24.7 2.8 13.0 31.4 33.6 2.2 6.9

6.9 14.7 7.8 112.3 9.6 17.3 7.8 80.8

1357.0 1633.0 276.1 20.3 1470.8 1613.7 142.9 9.7

(continued)

2002 2003 million EUR % 2002 2003 million EUR %

I quarter II quarter

million EUR change million EUR change Commodity groups*

Textile, leather materials, clothing, footwear and otherconsumer goods, including:

Chapter 62. Clothing and accessories to clothing other thanknitwear

Chapter 61. Clothing and accessories to clothing from knitwearChapter 64. Shoes, gaiters and similar articles; their componentsChapter 94. Furniture; medical furniture; sleeping accessories

and similar articles

Base metals and their products, including:Chapter 72. Cast-iron, iron and steelChapter 74. Copper and its productsChapter 73. Cast-iron, iron and steel productsChapter 76. Aluminium and its products

Machines, transport facilities, appliances, tools and weapons,including:

Chapter 84. Nuclear reactors, boilers, machines, appliancesand machinery; spare parts

Chapter 85. Electrical machines and appliancesChapter 90. Optical instruments and appliances

Chemical products, plastics and rubber, including:Chapter 39. Plastics and plastic productsChapter 28. Inorganic chemical productsChapter 29. Organic chemical productsChapter 31. FertilizersChapter 33. Essential oils, perfumes and toiletriesChapter 30. Pharmaceuticals

Mineral products and fuels, including:Chapter 27. Mineral fuels, mineral oils and distilled products

Animal and vegetable products, food, drink and tobacco, including:Chapter 10. CerealsChapter 24. Tobacco and processed substitutesChapter 22. Soft and alcoholic drinks and vinegars

Wood, paper, earthenware and glass products, including:

Chapter 44. Timber and wood products; wood coalChapter 48. Paper and cardboard, products of cellulose,

paper and cardboard

EXPORTS, TOTAL (FOB)

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003116(continued)

866.7 30.6 999.9 30.8 133.3 15.4

308.9 10.9 351.1 10.8 42.2 13.7248.4 8.8 297.0 9.1 48.6 19.6

85.2 3.0 96.0 3.0 10.8 12.7

49.5 1.8 64.0 2.0 14.5 29.3

467.2 16.5 601.5 18.5 134.4 28.8

184.6 6.5 285.1 8.8 100.5 54.4146.0 5.2 174.5 5.4 28.5 19.5

42.0 1.5 44.3 1.4 2.4 5.632.6 1.2 45.0 1.4 12.3 37.8

394.6 14.0 486.7 15.0 92.2 23.4

193.1 6.8 197.1 6.1 3.9 2.0120.1 4.2 169.8 5.2 49.7 41.4

19.0 0.7 23.0 0.7 4.0 21.2

348.4 12.3 360.9 11.1 12.5 3.660.3 2.1 66.1 2.0 5.8 9.565.1 2.3 64.9 2.0 -0.2 -0.358.5 2.1 59.1 1.8 0.6 1.034.2 1.2 45.9 1.4 11.6 34.036.7 1.3 38.5 1.2 1.8 4.837.1 1.3 33.4 1.0 -3.7 -10.0

321.6 11.4 322.9 9.9 1.3 0.4

278.0 9.8 283.9 8.7 5.9 2.1

290.4 10.3 313.1 9.6 22.7 7.8

53.3 1.9 42.7 1.3 -10.6 -20.028.9 1.0 43.5 1.3 14.7 50.938.1 1.3 35.1 1.1 -3.0 -7.8

138.9 4.9 161.7 5.0 22.7 16.453.3 1.9 58.3 1.8 5.0 9.4

16.5 0.6 32.0 1.0 15.5 94.0

2827.8 100.0 3246.8 100.0 419.0 14.8

* Commodity groups include chapters from the Harmonized System for Commodity Description and Coding.

Source: Customs declarations data supplemented with NSI information and processed by the BNB as of the moment of customs clearings.Data coordinated with the NSI.For 2002 − final data received from the Information Service AD.

For 2003 − preliminary data as of 3 September 2003 received from the Customs Agency.

Change on sameperiod of previous

year

million EUR share, % million EUR share, % million EUR %

January − June

2002 2003 Commodity groups*

Textile, leather materials, clothing, footwear and other

consumer goods, including:Chapter 62. Clothing and accessories to clothing other than

knitwearChapter 61. Clothing and accessories to clothing from knitwearChapter 64. Shoes, gaiters and similar articles; their componentsChapter 94. Furniture; medical furniture; sleeping accessories

and similar articles

Base metals and their products, including:

Chapter 72. Cast-iron, iron and steelChapter 74. Copper and its productsChapter 73. Cast-iron, iron and steel productsChapter 76. Aluminium and its products

Machines, transport facilities, appliances, tools and weapons,

including:Chapter 84. Nuclear reactors, boilers, machines, appliances

and machinery; spare partsChapter 85. Electrical machines and appliancesChapter 90. Optical instruments and appliances

Chemical products, plastics and rubber, including:Chapter 39. Plastics and plastic productsChapter 28. Inorganic chemical productsChapter 29. Organic chemical productsChapter 31. FertilizersChapter 33. Essential oils, perfumes and toiletriesChapter 30. Pharmaceuticals

Mineral products and fuels, including:

Chapter 27. Mineral fuels, mineral oils and distilled products

Animal and vegetable products, food, drink and tobacco, including:

Chapter 10. CerealsChapter 24. Tobacco and processed substitutesChapter 22. Soft and alcoholic drinks and vinegars

Wood, paper, earthenware and glass products, including:Chapter 44. Timber and wood products; wood coalChapter 48. Paper and cardboard, products of cellulose,

paper and cardboard


AAAAAppppppepepepepennnnndixdixdixdixdix 117IMPORTS BY COMMODITY GROUP

492.7 584.8 92.1 18.7 614.8 753.2 138.4 22.5

166.2 209.3 43.0 25.9 262.3 314.1 51.8 19.8137.8 159.5 21.8 15.8 157.8 195.0 37.2 23.6156.0 164.4 8.4 5.4 148.3 189.6 41.2 27.8

27.1 38.4 11.3 41.9 32.4 36.9 4.5 14.0

423.3 518.2 94.9 22.4 431.0 512.1 81.1 18.8366.2 421.1 54.8 15.0 392.6 424.3 31.7 8.1

36.3 77.3 41.0 112.9 19.0 68.8 49.8 262.2

306.5 361.2 54.7 17.8 422.7 473.0 50.2 11.9

60.6 68.5 7.9 13.0 67.7 74.6 6.9 10.239.5 47.5 8.0 20.2 53.6 61.0 7.4 13.932.5 32.9 0.5 1.4 49.6 51.2 1.6 3.3

18.9 25.1 6.1 32.3 40.1 46.6 6.5 16.226.1 29.0 3.0 11.4 34.6 37.6 3.0 8.7

17.4 26.3 8.8 50.6 21.6 28.9 7.3 33.717.6 23.1 5.4 30.7 23.7 29.2 5.5 23.2

228.0 261.6 33.6 14.7 262.8 295.3 32.5 12.456.7 73.8 17.1 30.2 76.7 92.3 15.6 20.447.3 57.6 10.3 21.7 47.3 49.5 2.2 4.631.9 26.6 -5.3 -16.5 24.5 31.2 6.7 27.419.0 21.2 2.2 11.4 24.9 24.3 -0.6 -2.4

105.7 124.8 19.1 18.1 120.8 151.8 31.0 25.737.5 44.1 6.6 17.7 43.3 58.7 15.4 35.520.9 27.5 6.6 31.6 28.7 31.7 3.0 10.523.9 27.2 3.4 14.0 24.2 32.0 7.9 32.6

131.9 120.8 -11.2 -8.5 124.4 135.3 10.9 8.815.1 10.0 -5.2 -34.2 12.3 12.8 0.5 4.2

74.6 89.6 15.0 20.1 92.2 100.0 7.8 8.5

42.3 43.7 1.4 3.3 47.8 47.9 0.1 0.3

16.7 21.6 4.9 29.4 28.4 32.0 3.6 12.8

1779.4 2082.5 303.2 17.0 2097.1 2452.8 355.7 17.0137.9 158.1 163.9 190.4

1641.5 1924.5 283.0 17.2 1933.2 2262.4 329.2 17.0

(continued)



million EUR change million EUR change Commodity groups*



Chapter 87. Automobile transportChapter 85. Electrical machines and appliancesChapter 90. Optical instruments and appliances

Mineral products and fuels, including:Chapter 27. Mineral fuels, mineral oils and distilled productsChapter 26. Ores, slags and ashes


Chapter 61. Clothing and accessories to clothing from knitwearChapter 52. CottonChapter 55. Staple synthetic and artificial fibresChapter 51. Wool, sheer and coarse filaments; yarns

and fabrics from manes and tailsChapter 54. Synthetic or artificial fibresChapter 62. Clothing and accessories to clothing other than

knitwearChapter 60. Knitwear textile

Chemical products, plastics and rubber, including:Chapter 39. Plastics and plastic productsChapter 30. PharmaceuticalsChapter 38. Miscellaneous products of chemical industryChapter 29. Organic chemical products

Base metals and their products, including:Chapter 72. Cast-iron, iron and steelChapter 73. Cast-iron, iron and steel productsChapter 76. Aluminium and its products

Animal and vegetable products, food, drink and tobacco,

including:Chapter 02. Meat and edible offal

Wood, paper, earthenware and glass products, including:Chapter 48. Paper and cardboard; products of cellulose,

paper and cardboard

Other imports 1

IMPORTS, TOTAL (CIF)( - ) Freight expenditureIMPORTS, TOTAL (FOB)


1107.4 28.6 1338.0 29.5 1271.6 114.8

428.5 11.1 523.3 11.5 482.3 112.6295.6 7.6 354.6 7.8 340.8 115.3304.4 7.9 354.0 7.8 356.4 117.1

59.4 1.5 75.3 1.7 70.4 118.5

854.3 22.0 1030.3 22.7 994.0 116.3

758.9 19.6 845.4 18.6 870.4 114.755.3 1.4 146.1 3.2 76.0 137.4

729.2 18.8 834.2 18.4 826.8 113.4128.3 3.3 143.1 3.2 148.3 115.6

93.1 2.4 108.5 2.4 105.6 113.582.0 2.1 84.1 1.9 91.9 112.1

59.1 1.5 71.7 1.6 64.8 109.860.6 1.6 66.6 1.5 69.3 114.2

39.0 1.0 55.1 1.2 45.1 115.441.3 1.1 52.3 1.2 46.6 112.7

490.8 12.7 556.9 12.3 568.3 115.8133.4 3.4 166.1 3.7 151.9 113.9

94.6 2.4 107.0 2.4 110.0 116.356.3 1.5 57.8 1.3 68.0 120.744.0 1.1 45.5 1.0 51.1 116.2

226.5 5.8 276.6 6.1 264.1 116.680.8 2.1 102.8 2.3 95.4 118.149.6 1.3 59.2 1.3 56.7 114.448.0 1.2 59.3 1.3 55.9 116.2

256.3 6.6 256.1 5.6 301.9 117.827.4 0.7 22.8 0.5 32.3 117.8

166.8 4.3 189.6 4.2 191.5 114.8

90.0 2.3 91.6 2.0 104.4 116.0

45.1 1.2 53.7 1.2 51.5 114.2

3876.5 100.0 4535.3 100.0 658.9 17.0301.8 348.4

3574.7 4186.9 612.3 17.1

* Commodity groups include chapters from the Harmonized System for Commodity Description and Coding.1 According to changes in the Customs Tariff, effective as of 1 January 2002, duty-free imported goods are included in the new Chapter 99,

Customs Concessions, of the Customs Tariff. However, data contained in tariff numbers of these goods specified in the customs declarationsis insufficient to classify them by type.




year


January − June

2002 2003 Commodity groups*



Chapter 87. Automobile transportChapter 85. Electrical machines and appliancesChapter 90. Optical instruments and appliances

Mineral products and fuels, including:

Chapter 27. Mineral fuels, mineral oils and distilled productsChapter 26. Ores, slags and ashes


Chapter 61. Clothing and accessories to clothing from knitwearChapter 52. CottonChapter 55. Staple synthetic and artificial fibresChapter 51. Wool, sheer and coarse filaments; yarns

and fabrics from manes and tailsChapter 54. Synthetic or artificial fibresChapter 62. Clothing and accessories to clothing other than

knitwearChapter 60. Knitwear textile

Chemical products, plastics and rubber, including:Chapter 39. Plastics and plastic productsChapter 30. PharmaceuticalsChapter 38. Miscellaneous products of chemical industryChapter 29. Organic chemical products

Base metals and their products, including:Chapter 72. Cast-iron, iron and steelChapter 73. Cast-iron, iron and steel productsChapter 76. Aluminium and its products

Animal and vegetable products, food, drink and tobacco,

including:Chapter 02. Meat and edible offal

Wood, paper, earthenware and glass products, including:Chapter 48. Paper and cardboard; products of cellulose,

paper and cardboard

Other imports 1

IMPORTS, TOTAL (CIF)( - ) Freight expenditureIMPORTS, TOTAL (FOB)

AAAAAppppppepepepepennnnndixdixdixdixdix 119EXPORTS BY MAJOR TRADING PARTNER AND REGION

770.4 910.2 139.8 18.2 839.0 923.5 84.4 10.1212.7 242.5 29.9 14.0 246.3 260.5 14.2 5.8135.4 160.9 25.5 18.8 152.7 184.0 31.3 20.5135.0 168.5 33.6 24.9 142.0 167.4 25.5 17.9

81.4 86.3 4.9 6.0 83.9 78.2 -5.7 -6.857.8 101.9 44.2 76.5 61.9 70.1 8.2 13.246.6 37.9 -8.7 -18.6 44.9 51.0 6.1 13.641.6 39.4 -2.3 -5.4 41.7 40.1 -1.6 -3.820.2 26.7 6.5 32.2 23.2 29.4 6.2 26.721.6 27.5 5.9 27.3 21.5 21.6 0.1 0.3

16.5 14.5 -2.0 -12.0 22.6 12.9 -9.6 -42.7

14.1 12.7 -1.4 -10.2 20.6 11.2 -9.4 -45.5

186.6 262.1 75.5 40.5 222.5 218.1 -4.4 -2.0

131.5 160.1 28.5 21.7 145.3 141.6 -3.7 -2.547.0 95.1 48.1 102.4 66.8 65.6 -1.1 -1.7

90.4 94.6 4.1 4.6 77.1 90.3 13.3 17.240.4 36.4 -4.0 -10.0 32.1 35.8 3.7 11.733.3 29.5 -3.9 -11.6 33.8 38.3 4.5 13.3

1.9 22.4 20.4 1050.4 2.4 7.1 4.7 200.2

73.3 91.6 18.2 24.9 79.1 98.8 19.7 24.9

42.2 47.4 5.2 12.2 33.4 51.3 17.8 53.39.2 11.7 2.5 27.2 9.4 14.6 5.2 54.7

10.2 11.7 1.5 15.1 11.3 13.7 2.4 21.36.4 8.7 2.3 36.0 8.0 9.6 1.7 20.82.2 7.9 5.8 264.2 14.1 6.1 -8.0 -56.73.1 4.1 1.0 30.9 2.9 3.6 0.7 22.6

65.1 60.0 -5.0 -7.7 62.8 62.0 -0.8 -1.323.2 22.2 -1.0 -4.4 22.0 20.3 -1.7 -7.811.6 14.0 2.5 21.3 13.9 11.0 -3.0 -21.314.8 8.6 -6.3 -42.3 10.8 12.1 1.4 12.5

154.7 200.0 45.3 29.3 167.8 208.1 40.3 24.00.9 14.3 13.4 1503.4 6.6 18.0 11.4 172.64.1 6.2 2.1 51.1 8.8 7.7 -1.1 -12.2

1357.0 1633.0 276.1 20.3 1470.8 1613.7 142.9 9.7

(continued)



million EUR change million EUR change Countries

European Union, incl.:Italy

Greece Germany France Belgium Spain United Kingdom Austria Netherlands

EFTA, incl.:Switzerland

Other OECD countries, incl.: 1

Turkey USA

Balkan countries, incl.: 2

Serbia and MontenegroMacedoniaCroatia

CEFTA, incl.:Romania

Hungary Poland Czech Republic Slovenia Slovakia

CIS and Baltic countries, incl.:Russia

Ukraine Georgia

Other countries, incl.:ChinaSoutheast Asian countries3



1609.4 56.9 1833.7 56.5 224.3 13.9

459.0 16.2 503.1 15.5 44.1 9.6288.1 10.2 344.9 10.6 56.8 19.7276.9 9.8 336.0 10.3 59.1 21.3165.3 5.8 164.5 5.1 -0.8 -0.5119.7 4.2 172.0 5.3 52.3 43.7

91.5 3.2 88.9 2.7 -2.6 -2.883.3 2.9 79.5 2.4 -3.8 -4.643.4 1.5 56.1 1.7 12.7 29.243.1 1.5 49.1 1.5 6.0 13.8

39.0 1.4 27.4 0.8 -11.6 -29.734.7 1.2 23.9 0.7 -10.8 -31.1

409.1 14.5 480.2 14.8 71.1 17.4276.9 9.8 301.7 9.3 24.9 9.0113.8 4.0 160.7 4.9 47.0 41.3

167.5 5.9 184.9 5.7 17.4 10.4

72.5 2.6 72.2 2.2 -0.3 -0.467.2 2.4 67.8 2.1 0.7 1.0

4.3 0.2 29.5 0.9 25.2 583.9

152.4 5.4 190.4 5.9 38.0 24.975.7 2.7 98.6 3.0 23.0 30.418.7 0.7 26.3 0.8 7.7 41.121.5 0.8 25.4 0.8 3.9 18.414.4 0.5 18.4 0.6 4.0 27.616.3 0.6 14.0 0.4 -2.2 -13.6

6.0 0.2 7.6 0.2 1.6 26.9

127.9 4.5 122.0 3.8 -5.8 -4.645.3 1.6 42.5 1.3 -2.8 -6.125.5 0.9 25.0 0.8 -0.5 -1.925.6 0.9 20.7 0.6 -4.9 -19.2

322.4 11.4 408.1 12.6 85.7 26.6

7.5 0.3 32.3 1.0 24.8 331.012.9 0.5 14.0 0.4 1.0 8.1

2827.8 100.0 3246.8 100.0 419.0 14.8

1 Australia, Canada, New Zealand, the USA, Turkey, and Japan are included.2 Albania, Bosnia and Herzegovina, Macedonia, Croatia, and Serbia and Montenegro are included.3 Korea, Malaysia, Thailand, the Philippines, and Indonesia are included.




year


January − June

2002 2003 Countries

European Union, incl.:

Italy Greece Germany France Belgium Spain United Kingdom Austria Netherlands

EFTA, incl.:Switzerland


Turkey USA


Serbia and MontenegroMacedoniaCroatia


Hungary Poland Czech Republic Slovenia Slovakia


Ukraine Georgia

Other countries, incl.:

ChinaSoutheast Asian countries3


AAAAAppppppepepepepennnnndixdixdixdixdix 121IMPORTS BY MAJOR TRADING PARTNER AND REGION

(continued)

893.0 1006.3 113.3 12.7 1089.9 1227.6 137.7 12.6249.0 290.1 41.1 16.5 281.3 346.7 65.3 23.2189.5 208.5 19.1 10.1 265.6 264.5 -1.1 -0.4112.1 146.0 33.8 30.2 133.5 160.7 27.2 20.4104.6 110.7 6.1 5.8 130.4 141.0 10.6 8.1

49.8 51.6 1.8 3.7 47.1 55.4 8.4 17.831.8 43.4 11.6 36.5 44.8 56.3 11.5 25.839.4 38.5 -1.0 -2.5 44.3 55.3 11.0 24.837.7 34.6 -3.1 -8.1 46.1 42.2 -3.9 -8.525.6 30.5 4.9 19.2 29.5 34.4 4.9 16.721.2 21.3 0.1 0.4 25.4 35.8 10.5 41.2

26.8 32.0 5.3 19.7 27.1 23.3 -3.8 -14.125.2 30.3 5.1 20.5 25.6 21.7 -3.9 -15.2

147.1 211.8 64.7 43.9 171.1 291.2 120.2 70.283.5 115.1 31.6 37.8 100.2 159.1 58.9 58.837.3 54.0 16.7 44.8 42.4 81.9 39.4 93.018.9 25.8 7.0 36.8 21.8 30.1 8.3 38.3

10.0 17.0 7.0 70.2 15.1 20.3 5.2 34.65.3 5.5 0.2 3.7 7.4 7.9 0.5 7.00.7 6.7 5.9 789.1 2.5 6.7 4.2 163.93.6 4.7 1.0 28.6 4.9 5.4 0.5 10.0

123.9 158.3 34.4 27.7 151.7 179.5 27.8 18.328.8 45.7 16.9 58.4 41.3 50.6 9.3 22.526.6 32.3 5.6 21.2 35.6 38.1 2.4 6.822.7 29.2 6.6 29.0 23.5 32.9 9.5 40.326.0 24.7 -1.3 -4.8 29.6 29.7 0.1 0.3

9.5 13.1 3.6 37.7 10.4 15.9 5.5 52.610.3 13.2 3.0 28.8 11.2 12.2 1.0 9.2

403.1 369.7 -33.4 -8.3 477.9 447.9 -30.0 -6.3325.7 298.5 -27.2 -8.4 402.5 315.0 -87.5 -21.7

62.6 53.9 -8.7 -13.9 65.6 79.9 14.3 21.7

175.5 287.5 112.0 63.8 164.4 263.0 98.6 60.028.3 45.5 17.2 60.7 33.9 56.9 22.9 67.7

8.1 20.5 12.4 153 6.4 26.5 20.1 31430.2 38.2 8.1 26.9 26.1 35.3 9.2 35.4

1779.4 2082.5 303.2 17.0 2097.1 2452.8 355.7 17.0



million EUR change million EUR change Countries

European Union, incl.:Germany

Italy Greece France United Kingdom Spain Austria Netherlands Belgium

Sweden

EFTASwitzerland


Turkey USA Japan


Serbia and MontenegroCroatiaMacedonia


Czech Republic Poland Hungary Slovakia Slovenia


Ukraine

Other countries, incl.:ChinaBrazilSoutheast Asian countries 3

IMPORTS, TOTAL (CIF)


1983.0 51.2 2234.0 49.3 251.0 12.7530.4 13.7 636.7 14.0 106.4 20.1455.1 11.7 473.1 10.4 18.0 3.9245.6 6.3 306.7 6.8 61.1 24.9235.0 6.1 251.6 5.5 16.7 7.1

96.8 2.5 107.0 2.4 10.2 10.576.6 2.0 99.8 2.2 23.2 30.283.7 2.2 93.7 2.1 10.0 12.083.8 2.2 76.9 1.7 -7.0 -8.355.1 1.4 64.9 1.4 9.8 17.946.5 1.2 57.1 1.3 10.5 22.6

53.9 1.4 55.3 1.2 1.4 2.750.8 1.3 52.0 1.1 1.3 2.5

318.2 8.2 503.0 11.1 184.8 58.1183.7 4.7 274.2 6.0 90.5 49.2

79.7 2.1 135.8 3.0 56.1 70.440.6 1.0 55.9 1.2 15.3 37.6

25.0 0.6 37.2 0.8 12.2 48.8

12.7 0.3 13.5 0.3 0.7 5.63.3 0.1 13.4 0.3 10.1 306.18.5 0.2 10.0 0.2 1.5 17.9

275.6 7.1 337.8 7.4 62.1 22.570.2 1.8 96.3 2.1 26.1 37.262.3 1.6 70.3 1.6 8.1 12.946.2 1.2 62.2 1.4 16.0 34.755.6 1.4 54.4 1.2 -1.2 -2.120.0 0.5 29.1 0.6 9.1 45.521.5 0.6 25.5 0.6 4.0 18.6

881.0 22.7 817.7 18.0 -63.3 -7.2728.2 18.8 613.5 13.5 -114.7 -15.8128.3 3.3 133.8 3.0 5.6 4.3

339.8 8.8 550.4 12.1 210.6 62.062.2 1.6 102.3 2.3 40.1 64.514.5 0.4 47.0 1.0 32.5 224.456.3 1.5 73.6 1.6 17.3 30.8

3876.5 100.0 4535.3 100.0 658.9 17.0


year


January − June

2002 2003 Countries

European Union, incl.:Germany

Italy Greece France United Kingdom Spain Austria Netherlands Belgium

Sweden

EFTASwitzerland


Turkey USA Japan


Serbia and MontenegroCroatiaMacedonia


Czech Republic Poland Hungary Slovakia Slovenia


Ukraine

Other countries, incl.:ChinaBrazilSoutheast Asian countries 3


1 Australia, Canada, New Zealand, the USA, Turkey, and Japan are included.2 Albania, Bosnia and Herzegovina, Macedonia, Croatia, and Serbia and Montenegro are included.3 Korea, Malaysia, Thailand, the Philippines, and Indonesia are included.

Source: Customs declarations data supplemented with NSI information and processed by the BNB as of the moment of customs clearings.Data coordinated with the NSI.For 2002 − final data received from the Information Service AD.For 2003 − preliminary data as of 3 September 2003 received from the Customs Agency.

AAAAAppppppepepepepennnnndixdixdixdixdix 123EXPORTS BY USE

499.5 572.5 73.0 14.6 508.6 585.9 77.4 15.246.6 49.4 2.7 5.9 55.0 73.6 18.5 33.7

3.2 4.1 0.9 26.8 4.4 4.0 -0.4 -9.317.9 16.0 -1.9 -10.7 20.1 19.1 -1.0 -5.1

313.4 364.4 51.0 16.3 299.3 346.6 47.3 15.841.0 42.6 1.6 3.9 42.5 38.9 -3.6 -8.543.3 54.1 10.8 25.0 51.7 59.3 7.6 14.834.1 41.9 7.8 23.0 35.5 44.4 8.9 25.1

547.3 686.8 139.5 25.5 620.6 662.5 41.9 6.882.7 140.0 57.3 69.2 101.9 145.1 43.2 42.4

102.3 133.7 31.4 30.7 109.5 103.1 -6.4 -5.853.3 60.9 7.6 14.3 64.2 56.3 -7.9 -12.340.0 40.0 0.0 -0.1 40.7 45.5 4.9 12.019.6 32.5 12.9 66.0 14.6 13.4 -1.3 -8.854.7 62.6 7.9 14.4 63.8 73.3 9.5 14.955.8 47.7 -8.2 -14.7 44.5 47.0 2.5 5.728.5 39.9 11.4 40.0 43.3 52.3 9.0 20.9

5.3 6.7 1.4 26.2 9.5 8.9 -0.6 -6.712.7 29.6 17.0 134.1 8.5 5.8 -2.7 -32.292.4 93.3 0.9 1.0 120.1 111.9 -8.3 -6.9

176.4 234.6 58.2 33.0 197.7 220.5 22.8 11.569.9 71.5 1.5 2.2 75.7 75.0 -0.7 -0.913.8 33.3 19.5 141.3 16.4 27.4 11.0 67.211.3 21.5 10.2 90.5 18.8 10.2 -8.6 -45.837.9 43.9 6.0 15.9 43.3 47.4 4.1 9.443.5 64.4 20.9 48.1 43.4 60.5 17.0 39.2

1223.2 1493.9 270.7 22.1 1326.8 1468.9 142.1 10.7

133.7 139.1 5.3 4.0 144.0 144.8 0.8 0.667.0 99.1 32.1 48.0 95.4 126.2 30.7 32.266.8 40.0 -26.8 -40.1 48.5 18.6 -29.9 -61.6

1357.0 1633.0 276.1 20.3 1470.8 1613.7 142.9 9.7

(continued)



million EUR change million EUR change Commodity groups

Consumer goodsFoodCigarettesDrinkClothing and footwearMedical goods and cosmeticsHousing and home furnitureOther

Raw material feedstocksCast-iron, iron and steelNonferrous metalsChemical productsPlastics, rubberFertilizersTextile materialsFood feedstocksWood and paper, cardboardCementTobaccoOther

Investment goodsMachines, tools and appliancesElectrical machinesTransport facilitiesSpare parts and equipmentOther

Nonenergy commodities, total

Energy commoditiesPetroleum productsOther





1008.1 35.7 1158.5 35.7 150.3 14.9

101.7 3.6 122.9 3.8 21.3 20.97.7 0.3 8.1 0.3 0.5 6.0

38.0 1.3 35.1 1.1 -2.9 -7.7612.7 21.7 711.0 21.9 98.3 16.1

83.5 3.0 81.5 2.5 -2.0 -2.494.9 3.4 113.4 3.5 18.4 19.469.6 2.5 86.3 2.7 16.7 24.1

1167.9 41.3 1349.3 41.6 181.5 15.5

184.6 6.5 285.1 8.8 100.5 54.4211.8 7.5 236.8 7.3 25.1 11.8117.5 4.2 117.2 3.6 -0.3 -0.2

80.7 2.9 85.5 2.6 4.8 6.034.2 1.2 45.9 1.4 11.6 34.0

118.5 4.2 135.9 4.2 17.4 14.7100.3 3.5 94.7 2.9 -5.7 -5.6

71.8 2.5 92.2 2.8 20.4 28.414.8 0.5 15.6 0.5 0.7 5.021.2 0.7 35.4 1.1 14.2 67.2

212.5 7.5 205.1 6.3 -7.4 -3.5

374.1 13.2 455.1 14.0 81.0 21.7145.7 5.2 146.5 4.5 0.9 0.6

30.2 1.1 60.7 1.9 30.5 101.130.1 1.1 31.7 1.0 1.6 5.481.2 2.9 91.3 2.8 10.1 12.486.9 3.1 124.8 3.8 37.9 43.6

2550.1 90.2 2962.9 91.3 412.8 16.2

277.7 9.8 283.9 8.7 6.2 2.2162.4 5.7 225.3 6.9 62.8 38.7115.3 4.1 58.6 1.8 -56.7 -49.2

2827.8 100.0 3246.8 100.0 419.0 14.8


year


January − June

2002 2003 Commodity groups

Consumer goods

FoodCigarettesDrinkClothing and footwearMedical goods and cosmeticsHousing and home furnitureOther

Raw material feedstocks

Cast-iron, iron and steelNonferrous metalsChemical productsPlastics, rubberFertilizersTextile materialsFood feedstocksWood and paper, cardboardCementTobaccoOther

Investment goodsMachines, tools and appliancesElectrical machinesTransport facilitiesSpare parts and equipmentOther


Energy commoditiesPetroleum productsOther


AAAAAppppppepepepepennnnndixdixdixdixdix 125IMPORTS BY USE

356.6 413.8 57.2 16.0 403.1 465.5 62.4 15.564.4 65.2 0.8 1.3 60.5 74.4 13.9 23.046.2 59.5 13.3 28.9 66.5 78.0 11.5 17.368.2 80.4 12.2 17.9 70.8 73.9 3.1 4.484.4 103.8 19.3 22.9 97.5 114.8 17.3 17.741.7 48.7 7.0 16.7 49.7 59.6 9.9 19.851.6 56.1 4.5 8.8 58.0 64.8 6.8 11.7

622.3 743.3 121.0 19.4 742.4 888.7 146.3 19.736.3 77.3 41.0 112.9 19.0 68.8 49.8 262.237.5 44.1 6.6 17.7 43.3 58.7 15.4 35.520.1 22.2 2.1 10.5 17.7 22.3 4.6 26.2

177.2 206.8 29.7 16.8 256.7 286.2 29.6 11.543.8 45.8 2.0 4.5 49.9 52.2 2.2 4.555.7 53.3 -2.4 -4.4 55.9 61.6 5.7 10.268.5 87.6 19.1 27.9 91.6 110.3 18.7 20.446.7 36.3 -10.5 -22.4 43.0 42.8 -0.1 -0.315.3 19.8 4.5 29.3 27.6 30.8 3.2 11.7

8.1 7.2 -0.8 -10.3 5.4 4.1 -1.3 -23.3113.1 142.8 29.7 26.3 132.5 151.0 18.5 14.0

411.0 478.9 68.0 16.5 524.9 637.3 112.4 21.4132.7 167.6 34.9 26.3 218.8 259.5 40.7 18.6

76.6 65.7 -11.0 -14.3 66.6 95.4 28.7 43.185.2 104.7 19.5 22.9 99.2 123.5 24.3 24.571.3 75.0 3.7 5.2 73.8 81.1 7.3 9.845.2 66.0 20.8 46.1 66.5 77.9 11.4 17.1

1389.8 1636.0 246.2 17.7 1670.4 1991.6 321.2 19.2

372.8 424.9 52.0 14.0 398.3 429.2 30.8 7.7355.4 401.8 46.5 13.1 377.3 389.8 12.5 3.3

307.1 342.6 35.4 11.5 338.5 327.3 -11.2 -3.336.6 48.5 12.0 32.7 26.7 52.2 25.5 95.611.6 10.7 -0.9 -8.0 12.1 10.3 -1.8 -14.817.5 23.1 5.6 31.9 21.1 39.4 18.3 86.917.5 23.1 5.6 31.9 21.1 39.4 18.3 86.9

16.7 21.6 4.9 29.4 28.4 32.0 3.6 12.8

1779.4 2082.5 303.2 17.0 2097.1 2452.8 355.7 17.0

(continued)



million EUR change million EUR change Commodity groups

Consumer goodsFood, drink and cigarettes

Housing and home furniture Medical goods and cosmetics Clothing and footwear Automobiles Other

Raw material feedstocksOres

Cast-iron, iron and steel Nonferrous metals Textile materials Wood and paper, cardboard Chemical products Plastics, rubber Food feedstocks Leather and furs Tobacco Other

Investment goodsMachines, tools and appliances

Electrical machines Transport facilities Spare parts and equipment Other


Energy commoditiesFuels

Crude oil and natural gas Coal Other fuels Other Oils

Other imports1



1 According to changes in the Customs Tariff, effective as of 1 January 2002, duty-free imported goods are included in the new Chapter 99,

Customs Concessions, of the Customs Tariff. However, data contained in tariff numbers of these goods specified in the customs declarationsis insufficient to classify them by type.

Source: Customs declarations data supplemented with NSI information and processed by the BNB as of the moment of customs clearings.Data coordinated with the NSI.For 2002 − final data received from the Information Service AD.For 2003 − preliminary data as of 3 September 2003 received from the Customs Agency.

759.6 19.6 879.3 19.4 119.7 15.8

124.9 3.2 139.6 3.1 14.7 11.8112.7 2.9 137.5 3.0 24.8 22.0139.0 3.6 154.3 3.4 15.3 11.0182.0 4.7 218.5 4.8 36.6 20.1

91.4 2.4 108.3 2.4 16.8 18.4109.7 2.8 121.0 2.7 11.3 10.3

1364.7 35.2 1632.0 36.0 267.3 19.655.3 1.4 146.1 3.2 90.8 164.280.8 2.1 102.8 2.3 22.0 27.337.7 1.0 44.5 1.0 6.7 17.8

433.8 11.2 493.1 10.9 59.2 13.793.8 2.4 98.0 2.2 4.2 4.5

111.6 2.9 114.9 2.5 3.3 2.9160.1 4.1 197.9 4.4 37.8 23.6

89.7 2.3 79.1 1.7 -10.6 -11.842.8 1.1 50.6 1.1 7.7 18.013.4 0.3 11.4 0.3 -2.1 -15.5

245.5 6.3 293.8 6.5 48.2 19.6

935.9 24.1 1116.3 24.6 180.4 19.3

351.5 9.1 427.1 9.4 75.6 21.5143.3 3.7 161.0 3.6 17.8 12.4184.4 4.8 228.2 5.0 43.8 23.8145.1 3.7 156.1 3.4 10.9 7.5111.6 2.9 143.9 3.2 32.2 28.9

3060.2 78.9 3627.6 80.0 567.4 18.5

771.2 19.9 854.1 18.8 82.9 10.7

732.6 18.9 791.6 17.5 59.0 8.1645.7 16.7 669.9 14.8 24.2 3.8

63.3 1.6 100.7 2.2 37.5 59.223.7 0.6 21.0 0.5 -2.7 -11.538.6 1.0 62.5 1.4 23.9 62.038.6 1.0 62.5 1.4 23.9 62.0

45.1 1.2 53.7 1.2 8.6 19.0

3876.5 100.0 4535.3 100.0 658.9 17.0


year


January − June

2002 2003 Commodity groups

Consumer goods

Food, drink and cigarettes Housing and home furniture Medical goods and cosmetics Clothing and footwear Automobiles Other

Raw material feedstocksOres

Cast-iron, iron and steel Nonferrous metals Textile materials Wood and paper, cardboard Chemical products Plastics, rubber Food feedstocks Leather and furs Tobacco Other

Investment goods

Machines, tools and appliances Electrical machines Transport facilities Spare parts and equipment Other


Energy commodities

Fuels Crude oil and natural gas Coal Other fuels Other Oils

Other imports1


AAAAAppppppepepepepennnnndixdixdixdixdix 127BALANCE OF PAYMENTS*

(million USD)

I II III I quarter IV V VI II quarter January−June

-164.8 -155.6 -91.7 -412.1 -381.8 -217.2 28.5 -570.5 -982.5

544.2 538.7 642.9 1725.7 570.4 568.0 656.8 1795.2 3521.0

-615.3 -660.0 -760.4 -2035.8 -837.4 -855.3 -816.2 -2508.9 -4544.7

-71.1 -121.4 -117.6 -310.0 -267.1 -287.3 -159.3 -713.7 -1023.7

147.0 138.8 159.9 445.7 160.1 239.8 379.1 779.0 1224.6

53.7 51.7 59.9 165.3 51.2 72.3 101.8 225.2 390.6

56.8 54.1 61.4 172.3 51.7 128.2 221.8 401.7 574.0

36.5 33.0 38.5 108.1 57.2 39.3 55.5 152.0 260.1

-168.5 -152.8 -184.1 -505.4 -195.1 -210.1 -222.3 -627.5 -1132.9

-71.1 -70.6 -82.7 -224.4 -89.0 -96.3 -95.2 -280.6 -505.0

-49.7 -39.8 -47.1 -136.6 -46.2 -57.2 -62.3 -165.7 -302.3

-47.7 -42.4 -54.3 -144.4 -59.8 -56.6 -64.8 -181.2 -325.6

-21.5 -14.0 -24.2 -59.7 -35.0 29.7 156.8 151.5 91.8

-92.7 -135.3 -141.8 -369.8 -302.0 -257.6 -2.5 -562.2 -932.0

40.2 19.7 22.7 82.5 22.3 32.7 22.2 77.2 159.7

-153.6 -67.7 -40.8 -262.1 -149.1 -37.4 -41.3 -227.8 -489.9

-113.4 -48.1 -18.2 -179.6 -126.7 -4.8 -19.2 -150.6 -330.3

-206.1 -183.4 -159.9 -549.4 -428.8 -262.4 -21.7 -712.8 -1262.2

41.3 27.8 68.2 137.3 47.0 45.2 50.2 142.4 279.7

54.3 38.6 78.3 171.2 69.5 53.7 61.4 184.6 355.8

-13.0 -10.7 -10.1 -33.8 -22.6 -8.5 -11.2 -42.3 -76.1

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-164.8 -155.6 -91.7 -412.1 -381.8 -217.2 28.5 -570.5 -982.5

-40.4 63.2 123.2 146.0 508.6 223.4 173.8 905.8 1051.8

-0.5 -0.4 -1.6 -2.6 -2.6 0.7 -2.2 -4.1 -6.7

42.6 50.6 128.2 221.4 94.5 109.6 86.2 290.3 511.7

13.0 10.0 -19.9 3.0 10.5 86.5 -36.6 60.4 63.4

4.1 -1.3 -1.4 1.4 -1.6 -0.2 -0.1 -1.9 -0.5

8.9 11.3 -18.6 1.6 12.1 86.7 -36.5 62.3 63.9

-32.0 -3.3 -29.8 -65.2 0.4 30.2 -1.4 29.2 -36.0

8.2 0.2 -2.1 6.3 -1.5 -0.8 0.7 -1.6 4.7

-40.2 -3.6 -27.7 -71.5 1.9 31.0 -2.1 30.8 -40.7

-1.4 34.7 -60.0 -26.8 256.7 -140.0 1.5 118.1 91.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-0.4 1.2 -1.2 -0.3 -5.3 -1.1 0.2 -6.3 -6.7

-1.3 0.9 -1.1 -1.5 -5.3 -0.7 0.5 -5.5 -6.9

0.9 0.3 -0.1 1.1 0.0 -0.5 -0.4 -0.8 0.3

(continued)

А. Current account 1

Goods: credit (FOB)

Goods: debit (FOB)

Trade balance 2

Services: credit

Transportation 3

Travel 4

Other services

Services: debit

Transportation 3

Travel 4

Other services

Services, net

Goods and nonfactor services, net

Income: credit

Income: debit

Income, net

Goods, nonfactor services

and income, net

Current transfers, net 5

Current transfers, credit

Current transfers, debit

B. Capital account 1, 6

Capital transfers, net

Groups A and B, total

C. Financial account 1, 6

Direct investment abroad

Direct investment in Bulgaria 7, 8

Portfolio investment − assets

Shares

Bonds

Portfolio investment − liabilities

Shares

Bonds

Other investment − assets 9

Trade credits, net

Loans

Commercial banks

Other sectors

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003128(continued) (million USD)

26.4 36.7 -81.4 -18.2 262.7 -139.4 0.3 123.6 105.4

26.4 22.1 -76.7 -28.2 291.1 -124.0 3.4 170.6 142.4

0.1 14.6 -4.7 10.0 -28.4 -15.4 -3.1 -47.0 -36.9

-27.5 -3.3 22.5 -8.3 -0.7 0.5 1.0 0.8 -7.5

-61.9 -28.4 106.4 16.1 149.0 136.5 126.4 411.9 428.0

15.5 15.5 15.5 46.4 24.5 21.8 7.3 53.6 99.9

8.7 -48.0 11.8 -27.5 96.5 24.2 13.5 134.3 106.8

7.0 -34.1 -24.2 -51.3 18.0 -0.8 -9.7 7.6 -43.7

3.0 -17.5 0.1 -14.4 5.2 13.9 -12.9 6.2 -8.2

-1.3 3.7 35.9 38.2 73.3 11.1 36.1 120.5 158.7

-50.7 0.6 49.8 -0.3 11.9 71.5 37.2 120.6 120.2

-35.3 3.6 29.4 -2.4 16.1 19.1 68.3 103.5 101.1

-205.1 -92.4 31.5 -266.0 126.7 6.3 202.3 335.3 69.3

-94.7 137.5 50.8 93.6 48.3 98.7 -134.5 12.5 106.2

-299.8 45.1 82.3 -172.4 175.1 104.9 67.8 347.9 175.4

299.8 -45.1 -82.3 172.4 -175.1 -104.9 -67.8 -347.9 -175.4

299.8 -59.4 -76.4 164.0 -361.4 -77.0 -67.8 -506.2 -342.1

0.0 14.3 -6.0 8.4 22.3 -28.0 0.0 -5.6 2.7

0.0 0.0 0.0 0.0 164.0 0.0 0.0 164.0 164.0


Currency and deposits

Commercial banks

Other sectors10

Other assets

Other investment − liabilities

Trade credits, net 11

Loans

General government

Commercial banks

Other sectors 8

Nonresidents’ deposits

Other liabilities

Groups A, B and C, total

D. Errors and omissions

OVERALL BALANCE (Groups A, B, C and D)

E. Reserves and other financing

BNB forex reserves 12

Use of Fund credits, net

Exceptional financing, net 13

* Analytical reporting of the balance of payments in accordance with IMF 5th edition of the Balance of Payments Manual. 1 Preliminary data. 2 Customs declarations data as of the moment of customs clearings, received from the Information Service AD, processed by the BNB and

supplemented with NSI information. Data coordinated with the NSI. Preliminary data as of 3 September 2003. 3 BNB estimates. 4 Data of the Ministry of Internal Affairs on the number and composition of tourists by purpose, and estimates of the Ministry of Economy and

the BNB. 5 Including data provided by the Agency for Foreign Aid and the Bulgarian Red Cross. 6 A minus sign denotes flight of capital (increase in assets or decrease in liabilities). 7 Data provided by the companies with foreign interest, the Privatization Agency, the NSI, the Central Depository, commercial banks, etc. The

Direct Investment in Bulgaria item includes nonresidents’ investment in real estate. 8 Based on reports on residents’ obligations on financial credits to nonresidents, received at the BNB. 9 Тhe Other Forex Deposits subitem indicating changes in forex deposits of households with local banks was excluded from the January 2003

Balance of Payments. Exclusion of this subitem resulted in data revisions, effective as of 1997.10 BNB data (subject to revisions) is used.11 Including Bulgaria’s foreign liabilities on trade credits (received advances and obligations to suppliers).12 Excluding changes in BNB forex reserves due to valuation adjustments. A minus sign denotes an increase in forex reserves and a positive

sign a decrease.13 Including loans extended for balance of payments support (incl. EU, the World Bank, etc.).

Changes in BNB forex reserves including valuation adjustments: 121.8 -45.9 -121.3 -45.4 -462.7 -376.0 108.9 -729.8 -775.2


(continued)

-309.2 -283.4 -168.8 -761.4 -701.4 -395.1 62.1 -1034.4 -1795.8

1038.5 982.9 1172.6 3194.0 1054.9 1002.2 1099.1 3156.2 6350.2

-1172.7 -1204.0 -1387.2 -3764.0 -1547.8 -1511.4 -1365.8 -4424.9 -8188.9

-134.2 -221.2 -214.6 -570.0 -492.9 -509.2 -266.7 -1268.7 -1838.7

271.8 252.2 290.0 814.1 288.8 405.3 636.5 1330.6 2144.6

100.7 94.2 108.9 303.7 93.6 124.0 170.6 388.2 691.9

104.5 98.2 111.2 313.9 93.2 215.9 372.0 681.1 995.0

66.6 59.9 70.0 196.5 101.9 65.5 93.9 261.3 457.8

-312.8 -278.6 -333.9 -925.2 -353.3 -358.9 -373.5 -1085.8 -2011.1

-134.4 -128.7 -150.6 -413.7 -163.8 -168.3 -159.5 -491.6 -905.3

-91.6 -72.2 -85.2 -248.9 -83.3 -96.3 -104.4 -284.0 -533.0

-86.8 -77.7 -98.1 -262.6 -106.2 -94.3 -109.6 -310.2 -572.8

-41.0 -26.3 -43.9 -111.2 -64.6 46.3 263.0 244.7 133.6

-175.2 -247.5 -258.5 -681.2 -557.5 -462.8 -3.7 -1024.0 -1705.2

73.9 35.7 41.0 150.6 40.1 55.3 37.3 132.7 283.3

-282.8 -123.0 -73.9 -479.7 -267.2 -63.0 -69.3 -399.5 -879.2

-208.8 -87.3 -32.9 -329.0 -227.1 -7.7 -32.1 -266.8 -595.8

-384.0 -334.8 -291.4 -1010.2 -784.5 -470.5 -35.7 -1290.8 -2301.0

74.9 51.3 122.6 248.8 83.1 75.4 97.8 256.4 505.2

98.7 70.1 140.7 309.5 123.1 89.6 116.8 329.4 638.9

-23.8 -18.7 -18.1 -60.7 -39.9 -14.1 -19.0 -73.1 -133.7

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-309.2 -283.4 -168.8 -761.4 -701.4 -395.1 62.1 -1034.4 -1795.8

-90.2 115.6 219.8 245.1 909.9 356.2 285.3 1551.4 1796.5

-1.0 -0.7 -3.0 -4.7 -4.6 1.1 -3.7 -7.2 -11.9

78.4 91.9 232.1 402.5 170.2 184.5 144.5 499.2 901.7

24.9 18.0 -35.8 7.1 19.5 147.1 -62.3 104.2 111.3

8.2 -2.5 -2.3 3.4 -2.5 0.6 -0.8 -2.7 0.7

16.7 20.5 -33.5 3.7 22.0 146.4 -61.5 106.9 110.6

-59.4 -6.1 -54.0 -119.5 0.8 50.9 -2.1 49.6 -69.9

15.1 0.4 -3.9 11.7 -2.7 -1.3 1.2 -2.8 8.9

-74.5 -6.5 -50.1 -131.2 3.5 52.2 -3.3 52.4 -78.8

-2.1 62.8 -108.2 -47.5 463.9 -233.1 -8.5 222.3 174.8

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-0.7 2.2 -2.1 -0.6 -9.4 -1.9 0.3 -11.0 -11.6

-2.4 1.6 -1.9 -2.6 -9.4 -1.1 0.9 -9.6 -12.2

1.7 0.6 -0.2 2.0 0.0 -0.8 -0.6 -1.4 0.6

А. Current account 1

Goods: credit (FOB)

Goods: debit (FOB)

Trade balance 2

Services: credit

Transportation 3

Travel 4

Other services

Services: debit

Transportation 3

Travel 4

Other services

Services, net

Goods and nonfactor services, net

Income: credit

Income: debit

Income, net

Goods, nonfactor services

and income, net

Current transfers, net 5

Current transfers, credit

Current transfers, debit

B. Capital account 1, 6

Capital transfers, net

Groups A and B, total

C. Financial account 1, 6

Direct investment abroad

Direct investment in Bulgaria 7, 8

Portfolio investment − assets

Shares

Bonds

Portfolio investment − liabilities

Shares

Bonds

Other investment − assets 9

Trade credits, net

Loans

Commercial banks

Other sectors

BALANCE OF PAYMENTS*(million BGN)


BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003130(continued) (million BGN)

Currency and deposits

Commercial banks

Other sectors10

Other assets

Other investment − liabilities

Trade credits, net 11

Loans

General government

Commercial banks

Other sectors 8

Nonresidents’ deposits

Other liabilities

Groups A, B and C, total

D. Errors and omissions

OVERALL BALANCE (Groups A, B, C and D)

E. Reserves and other financing

BNB forex reserves 12

Use of Fund credits, net

Exceptional financing, net 13

48.7 66.6 -147.2 -31.9 473.8 -234.0 0.5 240.3 208.4

48.5 40.2 -138.8 -50.1 525.0 -208.7 5.8 322.1 272.0

0.2 26.4 -8.3 18.2 -51.2 -25.3 -5.2 -81.8 -63.6

-50.1 -6.0 41.1 -15.0 -0.5 2.8 -9.3 -7.0 -22.0

-131.1 -50.4 188.6 7.2 260.0 205.8 217.5 683.3 690.4

28.5 28.1 28.0 84.5 44.1 36.7 12.3 93.1 177.6

16.1 -87.2 21.4 -49.6 173.9 40.4 22.2 236.5 186.9

12.8 -62.0 -43.8 -92.9 32.5 -1.3 -16.2 15.0 -77.9

5.7 -31.9 0.3 -25.9 9.2 23.1 -22.1 10.1 -15.8

-2.4 6.7 64.9 69.2 132.2 18.6 60.5 211.4 280.6

-93.4 1.1 90.1 -2.2 21.4 119.2 62.4 203.1 200.9

-82.3 7.6 49.2 -25.5 20.6 9.5 120.6 150.6 125.1

-399.4 -167.9 51.0 -516.3 208.5 -38.9 347.4 517.0 0.7

-152.7 249.7 98.0 195.0 107.2 215.1 -233.7 88.7 283.7

-552.1 81.8 149.0 -321.3 315.7 176.2 113.8 605.7 284.4

552.1 -81.8 -149.0 321.3 -315.7 -176.2 -113.8 -605.7 -284.4

552.1 -107.8 -138.2 306.1 -651.7 -129.2 -113.8 -894.6 -588.6

0.0 26.0 -10.8 15.2 40.3 -47.1 0.0 -6.8 8.4

0.0 0.0 0.0 0.0 295.7 0.0 0.0 295.7 295.7


* Analytical reporting of the balance of payments in accordance with IMF 5th edition of the Balance of Payments Manual. 1 Preliminary data. 2 Customs declarations data as of the moment of customs clearings, received from the Information Service AD, processed by the BNB and

supplemented with NSI information. Data coordinated with the NSI. Preliminary data as of 3 September 2003. 3 BNB estimates. 4 Data of the Ministry of Internal Affairs on the number and composition of tourists by purpose, and estimates of the Ministry of Economy and

the BNB. 5 Including data provided by the Agency for Foreign Aid and the Bulgarian Red Cross. 6 A minus sign denotes flight of capital (increase in assets or decrease in liabilities). 7 Data provided by the companies with foreign interest, the Privatization Agency, the NSI, the Central Depository, commercial banks, etc. The

Direct Investment in Bulgaria item includes nonresidents’ investment in real estate. 8 Based on reports on residents’ obligations on financial credits to nonresidents, received at the BNB. 9 Тhe Other Forex Deposits subitem indicating changes in forex deposits of households with local banks was excluded from the January 2003

Balance of Payments. Exclusion of this subitem resulted in data revisions, effective as of 1997.10 BNB data (subject to revisions) is used.11 Including Bulgaria’s foreign liabilities on trade credits (received advances and obligations to suppliers).12 Excluding changes in BNB forex reserves due to valuation adjustments. A minus sign denotes an increase in forex reserves and a positive

sign a decrease.13 Including loans extended for balance of payments support (incl. EU, the World Bank, etc.).

AAAAAppppppepepepepennnnndixdixdixdixdix 131DOMESTIC GOVERNMENT DEBT

(BGN’000/EUR’000/USD’000)

Amountas of

30 June 2002

Change in 2003

increase decrease

Amount as of31 December

2002

4 090.9 4 090.9 - 4 090.9 4 090.9 - 2 659.7 - 2 659.7 2 659.7 - 2 659.7

179 719.4 91 653.8 88 065.6 139 929.7 79 929.7 60 000.0

39 789.7 11 724.1 28 065.6 480 853.1 155 351.6 325 501.5 451 915.5 155 351.6 296 563.9 211 958.6 106 680.5 105 278.1 239 956.9 48 671.1 191 285.8

28 937.6 - 28 937.6 28 937.6 - 28 937.6

794 946.9 74 495.2 720 451.7 111 748.7 73 715.3 38 033.4

35 676.8 35 676.8 - 76 071.8 38 038.5 38 033.4

363 847.6 779.9 363 067.7 15 709.9 779.9 14 930.0

174 103.5 - 174 103.5 174 034.2 - 174 034.2 319 350.6 - 319 350.6 237 780.3 - 237 780.3

81 570.3 - 81 570.3 - 557 260.4 35 773.7 521 486.7 - 109 842.2 35 773.7 74 068.5

71 519.0 35 773.7 35 745.3 38 323.2 38 323.2

- 132 664.6 - 132 664.6 57 664.6 57 664.6 75 000.0 75 000.0

- 314 753.6 - 314 753.6 264 753.6 264 753.6 205 362.2 205 362.2

50 000.0 50 000.0

1 462 270.1 557 260.4 361 365.2 1 658 165.3

2 476.6 275.2 2 201.4

1 907.7 1 907.7

6 890.0 6 890.0 195 836.5 16 844.8 178 991.6 369 143.9 306 360.3 126 803.5 4 168.8 7 727.0 123 245.2 248 006.0 241 046.7

739.3 739.3

629 163.5 559 145.4

(continued)

I. DEBT ON GOVERNMENT SECURITIES ISSUEDFOR BUDGET DEFICIT FINANCING1. Government securities issued in 1998

5-year2. Government securities issued in 1999

5-year3. Government securities issued in 2000

3-year5-year

4. Government securities issued in 2001 4.1. Medium-term

2-year5-year

4.2. Long-term7-year

5. Government securities issued in 2002 5.1. Short-term

3-month12-month

5.2. Medium-term2-year3-year5-year

5.3. Long-term7-year10-year

6. Government securities issued in 2003 6.1. Short-term

3-month12-month

6.2. Medium-term3-year5-year

6.3. Long-term7-year EUR-denominated (lev equivalent)10-year

TOTAL (I)

II. DEBT ON GOVERNMENT SECURITIES ISSUED FOR STRUCTURAL REFORMА1. Long-term government bonds issued pursuant to CM Decree No. 244 of 1991А2. Long-term government bonds issued pursuant to CM Decree No. 234 of 1992А3. Long-term government bonds issued pursuant to Articles 4 and 5 of ZUNK of 1993

in BGNin USDlev equivalentin EURlev equivalent

А4. Long-term government bonds issued pursuant to CM Decree No. 3 of 1994

TOTAL (A)

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003132(continued) (BGN’000/EUR’000/USD’000)

Amountas of

30 June 2002

Change in 2003

increase decrease

Amount as of31 December

2002

18 437.3 16 561.3 1 876.0 1 876.0 -

16 561.3 16 561.3

18 437.3 16 561.3

647 600.8 575 706.7

2 109 870.8 2 233 871.9

1 881.2 -

2 111 752.0 2 233 871.9

Note: Domestic debt based on cash flows. The IMF extends its tranches to the central bank which then on-lends them to the government underArticle 45 of the Law on the BNB. So far, the credits extended by the BNB to the MF are reported as domestic government debt to theBNB, on the one hand, and foreign liabilities of the BNB to the IMF, on the other hand. The lev equivalent of the debt denominated inforeign currency is calculated on the basis of the exchange rate of the relevant currency against the lev at end of month:31 December 2002 − USD 1/BGN 1.88496, EUR 1/BGN 1.95583;

31 May 2003 − USD 1/BGN 1.65440, EUR 1/BGN 1.95583.

Source: MF.

B. Government securities issued in BGN pursuant to Articles 8 and 9 of LSPDACB of 1996 Government securities issued in 1996 Government securities issued in 1997

TOTAL (B)

TOTAL (II)

GOVERNMENT DEBT, TOTAL

III. DOMESTIC GOVERNMENT GUARANTEES

DOMESTIC DEBT, TOTAL


I. REVENUE AND GRANTSTotal revenueCurrent revenue Tax revenue Nontax revenue Grants

II. EXPENDITURECurrent expenditure Capital expenditure Government reserve growth and purchase of agricultural output

III. TRANSFERS (SUBSIDIES, CONTRIBUTIONS) FROM/TOREPUBLICAN BUDGET, BUDGETARY ACCOUNTS ANDEXTRABUDGETARY FUNDS/ACCOUNTS (NET)

IV. TEMPORARY NONINTEREST-BEARING LOANS FROM/TOCENTRAL REPUBLICAN BUDGET, BUDGETARY ANDEXTRABUDGETARY FUNDS AND ACCOUNTS (NET)

V. TRANSFERS (SUBSIDIES, CONTRIBUTIONS) FROM/TOCENTRAL REPUBLICAN BUDGET TO OTHER BUDGETS (NET)

VI. DEFICIT (-)/SURPLUS (+)

VII. FINANCINGExternal financing, netInternal financing, netPrivatization

CONSOLIDATED STATE BUDGET AS OF 30 JUNE 2003(BGN'000)

6 833 117.0 4 220 743.4 3 415 185.1 805 557.4 0.96 724 827.6 4 210 140.5 3 410 277.3 799 862.3 0.96 724 827.6 4 210 140.5 3 410 277.3 799 862.3 0.95 318 464.0 3 176 680.2 2 923 524.2 253 156.01 406 363.6 1 033 460.3 486 753.1 546 706.3 0.9

108 289.4 10 602.9 4 907.8 5 695.1

6 206 673.2 2 605 260.2 598 519.6 2 003 528.8 3 211.95 806 455.4 2 399 925.4 572 114.1 1 824 618.5 3 192.9

379 577.9 184 702.0 14 612.6 170 070.4 19.0

8 783.0 8 783.0 8 783.0

0.0 -261 973.0 -97 426.9 -164 546.1

0.0 864.2 -51 198.6 52 062.8

0.0 -771 600.2 -2 328 844.3 1 554 038.1 3 206.1

626 443.7 582 774.2 339 195.7 243 583.5 -4.9

-626 443.7 -582 774.2 -339 195.7 -243 583.5 4.9182 428.4 175 084.1 143 307.1 31 776.9

-844 360.2 -786 469.0 -558 181.5 -228 292.5 4.9113 823.3 85 678.2 85 678.2

Ministries andagencies

(total)

Consolidatedfiscal program

Republicanbudget

Centralrepublican

budget

National AuditChamber

1 725 281.5 26 909.0 682 582.0 95 638.2 1 399.01 725 281.5 26 909.0 679 332.2 7 828.0 751.41 725 281.5 26 909.0 679 332.2 7 828.0 751.41 688 704.2 453 034.1 45.6

36 577.3 26 909.0 226 298.1 7 782.4 751.43 249.8 87 810.2 647.6

2 195 842.6 68 525.6 895 220.4 172 254.9 24 549.22 197 673.8 66 461.1 828 688.6 75 492.3 4 086.6

-1 831.2 2 064.5 66 531.8 96 755.6 20 462.6

34.5 -1 247.6 56 064.6 91 446.5 -10 502.8

-171.6 -62.8 -629.7

489 519.7 44 471.0 205 148.1

18 993.1 1 606.8 48 402.7 14 767.0 -34 282.8

-18 993.1 -1 606.8 -48 402.7 -14 767.0 34 282.8-856.9 1 156.4 7 044.9

-18 136.2 -1 606.8 -49 653.1 -3 091.2 8 778.91 881.9 26 263.3

SocialSecurity

(total)

Legalinstitutions

MunicipalitiesExtrabudgetary

funds andaccounts

Municipalities’extrabudgetary

funds andaccounts, total

I. REVENUE AND GRANTSTotal revenueCurrent revenue Tax revenue Nontax revenue Grants

II. EXPENDITURECurrent expenditure Capital expenditure Government reserve growth and purchase of agricultural output

III. TRANSFERS (SUBSIDIES, CONTRIBUTIONS) FROM/TOREPUBLICAN BUDGET, BUDGETARY ACCOUNTS ANDEXTRABUDGETARY FUNDS/ACCOUNTS (NET)

IV. TEMPORARY NONINTEREST-BEARING LOANS FROM/TOCENTRAL REPUBLICAN BUDGET, BUDGETARY ANDEXTRABUDGETARY FUNDS AND ACCOUNTS (NET)

V. TRANSFERS (SUBSIDIES, CONTRIBUTIONS) FROM/TOCENTRAL REPUBLICAN BUDGET TO OTHER BUDGETS (NET)

VI. DEFICIT (-)/SURPLUS (+)

VII. FINANCINGExternal financing, netInternal financing, netPrivatization

Source: MF.

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003134GROSS FOREIGN DEBT

(million USD)

By debtor 1

2001 2002 2 0 0 3

XII XII I II III IV V VI

10625.4 11227.6 11382.5 11359.1 11470.9 11908.8 12269.9 12141.9

8635.9 8333.4 8402.7 8365.3 8336.2 8612.3 8814.5 8703.6

7734.0 7977.1 8047.2 8028.0 8025.0 8293.8 8473.0 8350.9

2754.7 3091.5 3164.6 3149.1 3133.8 3377.0 3481.2 3402.0

4979.3 4885.7 4882.6 4878.9 4891.2 4916.8 4991.8 4948.9

725.0 528.7 538.4 537.4 538.0 542.2 559.5 581.2

725.0 528.7 538.4 537.4 538.0 542.2 559.5 581.2

65.8 21.1 21.4 10.6 10.7 10.7 0.0 0.0

111.1 -193.5 -204.4 -210.7 -237.5 -234.5 -218.1 -228.5

20.4 1.3 1.3 1.3 1.3 1.9 1.9 1.9

1.3 1.3 1.3 1.3 1.9 1.9 1.9

20.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0

8.6 8.4 8.8 8.3 8.1 8.3 9.0 8.1

2.8 7.1 7.5 6.8 6.9 7.1 7.8 7.0

5.8 1.2 1.3 1.5 1.2 1.2 1.2 1.1

93.8 91.9 89.7 85.2 80.4 83.3 84.8 80.6

0.2 0.9 2.6 2.6 2.6 2.7 2.9 3.0

47.5 33.3 34.0 34.0 33.7 36.0 36.7 32.2

46.1 57.6 53.1 48.5 44.0 44.7 45.3 45.4

-11.7 -295.1 -304.1 -305.5 -327.2 -328.0 -313.8 -319.1

1989.4 2894.2 2979.8 2993.8 3134.8 3296.5 3455.4 3438.3

306.0 437.6 411.1 380.6 428.3 434.4 485.1 471.2

60.0 42.5 41.8 42.6 43.7 41.1 42.0 41.0

47.2 87.2 93.0 76.4 77.2 79.9 86.1 85.8

0.0 10.8 0.0 0.0 0.0 0.0 0.0

198.8 308.0 265.5 261.6 307.4 313.3 357.1 344.4

1683.4 2456.6 2568.6 2613.2 2706.5 2862.1 2970.3 2967.0

529.8 659.4 725.4 736.1 768.2 794.7 839.5 838.6

487.2 707.9 734.0 737.9 785.9 891.1 933.1 923.8

666.4 1089.3 1109.3 1129.2 1149.2 1173.1 1194.2 1201.4

0.0 0.0 10.0 3.2 3.2 3.4 3.3

1 Preliminary data. The USD equivalent is calculated at end of period exchange rates of respective currencies.2 Source: System of Debt Registration, Service and Management of the Ministry of Finance and the Bulgarian National Bank − preliminary data

as of 8 September 2003.3 In accordance with the international statistical methodology of foreign debt, the BNB has included government guaranteed loans of budget

and nonbudget enterprises in government guaranteed debt amount.4 Commercial banks data.5 Including only credits registered with the BNB, on which information is available.6 BNB estimates on trade credit data for the second quarter of 2003.7 Including government securities (denominated in levs and in foreign currency) held by nonresidents, less Brady bonds, eurobonds and global

bonds held by residents.

GROSS FOREIGN DEBT (А + B) 1

А. Public sector (I+II+III+IV)

I. Government (1+2) 2

1. Loans

2. Bonds

II. Government guaranteed debt 2, 3

Loans

III. BNB2

IV. Other debtors

Municipalities(1+2)

1. Loans

2. Bonds

Commercial banks (1+2) 4

1. Loans

2. Nonresidents’ deposits

Companies (1+2+3) 5

1. Intracompany loans

2. Other loans

3. Trade credits 6

Other7

B. Private sector (I+II)

I. Commercial banks (1+2+3+4) 4


2. Other loans

3. Bonds


II. Companies (1+2+3+4) 5


2. Other loans

3. Trade credits 6

4. Bonds

AAAAAppppppepepepepennnnndixdixdixdixdix 135GROSS FOREIGN DEBT SERVICE

(million USD)

513.7 198.7 712.4 264.5 206.7 471.1 134.2 49.4 183.7 398.7 256.1 654.8

337.7 182.3 520.0 159.3 195.6 354.9 69.9 30.2 100.1 229.2 225.8 455.1

255.0 164.0 419.0 133.6 188.9 322.5 43.0 22.3 65.3 176.6 211.2 387.7

238.9 53.1 292.0 82.7 26.4 109.2 43.0 22.3 65.3 125.8 48.7 174.4

16.1 110.9 127.0 50.8 162.5 213.3 0.0 0.0 0.0 50.8 162.5 213.3

20.7 13.7 34.4 11.4 5.7 17.1 10.0 7.2 17.1 21.3 12.9 34.2

20.7 13.7 34.4 11.4 5.7 17.1 10.0 7.2 17.1 21.3 12.9 34.2

26.9 0.8 27.7 10.6 0.2 10.8 10.9 0.1 11.0 21.6 0.2 21.8

35.2 3.8 39.0 3.7 0.8 4.6 6.0 0.7 6.7 9.8 1.5 11.3

21.5 2.1 23.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

21.5 2.1 23.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.8 0.1 3.9 1.1 0.2 1.3 1.7 0.1 1.8 2.8 0.2 3.1

0.3 0.1 0.3 0.8 0.2 1.0 1.5 0.1 1.5 2.3 0.2 2.5

3.6 0.0 3.6 0.3 0.0 0.3 0.3 0.0 0.3 0.5 0.0 0.5

7.4 1.1 8.4 0.3 0.1 0.4 4.3 0.6 4.9 4.6 0.7 5.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

7.3 1.1 8.4 0.3 0.1 0.4 4.3 0.6 4.9 4.6 0.7 5.3

2.4 0.6 3.0 2.3 0.6 2.9 0.0 0.0 0.0 2.3 0.6 2.9

176.0 16.4 192.4 105.2 11.0 116.2 64.3 19.2 83.6 169.5 30.3 199.8

86.3 3.2 89.5 69.9 4.4 74.3 19.8 1.7 21.5 89.6 6.1 95.8

14.7 1.5 16.2 0.7 0.8 1.4 3.6 0.6 4.2 4.2 1.3 5.6

8.3 1.6 9.9 16.3 3.7 20.0 1.8 1.1 2.9 18.1 4.8 22.9

4.9 0.0 4.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

58.4 0.0 58.4 52.9 0.0 52.9 14.4 0.0 14.4 67.3 0.0 67.3

89.7 13.3 102.9 35.3 6.6 41.9 44.6 17.5 62.1 79.9 24.1 104.0

64.3 4.3 68.6 15.4 2.1 17.5 15.7 3.0 18.7 31.2 5.1 36.3

25.4 9.0 34.4 19.9 4.5 24.4 28.8 14.5 43.4 48.7 19.0 67.7

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1 Including payments on loans extended in support of the balance of payments.2 Actual payments. Preliminary data. The equivalent in US dollars is calculated at average monthly exchange rates of respective currencies.3 Source: System of Debt Registration, Service and Management of the Ministry of Finance and the Bulgarian National Bank − preliminary

data as of 8 September 2003.4 In accordance with the international statistical methodology of foreign debt, the BNB has included government guaranteed loans of budget

and nonbudget enterprises in government guaranteed debt amount.5 Principal and interest payments on municipal bonds bought by nonresidents.6 Commercial banks data.7 Including only principal and interest payments on credits registered with the BNB and on which information is available. Due to quarterly

reporting of these liabilities provided for by the Foreign Exchange Law, data on nonfinancial corporations is subject to revisions.8 Including principal and interest payments on government securities and ZUNK (denominated in levs and in foreign currency) bought by

nonresidents. Including also bonds issued by residents (Brady bonds and global bonds) and bought by residents provided the seller is anonresident.

January − June 2002 I quarter, 2003 II quarter, 2003 January − June 2003

By debtor1

Principal Interest Total Principal Interest Total Principal Interest Total Principal Interest Total

Total (А + B) 2

А. Public sector (I+II+III+IV) 3


1. Loans

2. Bonds


Loans

III. BNB 3

IV. Other debtors

Municipalities (1+2)

1. Loans

2. Bonds


1. Other loans


Companies (1+2) 7


2. Other loans

Other 8




2. Other loans

3. Bonds


II. Companies (1+2+3) 7


2. Other loans

3. Bonds


1 Foreign obligations on revolving credits and on credits payable at request are included in Bulgaria’s gross foreign debt amount (short-termdebt).

2 Including government securities (denominated in levs and in foreign currency) held by nonresidents, less Brady bonds, eurobonds and globalbonds held by residents.

Source: Ministry of Finance, BNB, commercial banks, local physical persons and legal entities.

GROSS FOREIGN DEBT(million USD)

By creditor

2001 2002 2 0 0 3

XII XII I II III IV V VI

10625.4 11227.6 11382.5 11359.1 11470.9 11908.8 12269.9 12141.9

9406.8 9388.6 9523.9 9492.4 9485.2 9786.2 10051.4 9912.9

3421.4 3424.1 3499.3 3471.1 3455.3 3697.5 3801.1 3713.8

2750.9 2817.1 2874.6 2869.3 2873.9 3108.6 3185.8 3119.6

1109.7 1049.2 1062.3 1072.3 1068.6 1099.1 1099.4 1084.6

950.0 1008.3 1029.0 1013.4 1017.8 1199.0 1238.0 1209.0

343.7 404.7 421.8 420.5 424.9 434.1 461.1 445.7

347.6 354.9 361.4 363.1 362.6 376.4 387.3 380.3

670.5 607.0 624.7 601.8 581.5 589.0 615.3 594.2

382.0 295.2 305.6 285.5 263.9 268.6 283.3 274.5

288.4 311.8 319.2 316.2 317.6 320.4 332.1 319.6

5985.4 5964.6 6024.6 6021.3 6029.9 6088.7 6250.3 6199.1

4759.0 2488.8 2438.0 2438.0 2438.0 2438.0 2438.0 2438.0

220.3 259.4 270.4 269.5 272.4 278.3 295.5 285.7

0.0 2137.4 2174.2 2171.3 2180.8 2200.5 2258.2 2225.2

20.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-11.7 -295.1 -304.1 -305.5 -327.2 -328.0 -313.8 -319.1

99.3 123.1 138.7 122.1 124.0 124.2 131.4 128.1

898.2 1250.8 1307.3 1325.8 1341.9 1375.6 1440.8 1441.2

1218.6 1839.0 1858.6 1866.6 1985.7 2122.5 2218.5 2229.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1218.6 1839.0 1858.6 1866.6 1985.7 2122.5 2218.5 2229.0

215.4 322.9 281.3 266.8 312.5 318.4 362.7 351.2

1003.2 1516.1 1577.3 1599.8 1673.3 1804.1 1855.9 1877.8

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

GROSS FOREIGN DEBT (A + B) 1

A. Long-term debt

I. Official creditors

1. International financial institutions

IMF

World Bank

European Union

Other international financial institutions

2. Bilateral credits

Paris Club and nonrescheduled debt

Other bilateral credits

II. Private creditors

1. Brady bonds

2. Eurobonds

3. Global bonds

4. Other bonds

5. Other government securities 2

6. Commercial banks

7. Other sectors

B. Short-term debt



1. Commercial banks

2. Other sectors

3. Government securities

AAAAAppppppepepepepennnnndixdixdixdixdix 137GROSS FOREIGN DEBT SERVICE

(million USD)

January − June 2002 I quarter, 2003 II quarter, 2003 January − June 2003

By creditor

Principal Interest Total Principal Interest Total Principal Interest Total Principal Interest Total

513.7 198.7 712.4 264.5 206.7 471.1 134.2 49.4 183.7 398.7 256.1 654.8

405.8 195.0 600.8 190.5 203.9 394.5 97.6 38.3 135.9 288.1 242.2 530.3

292.0 64.9 356.8 110.0 31.3 141.4 69.9 27.7 97.7 180.0 59.1 239.0

198.2 53.3 251.6 62.6 24.6 87.1 64.9 24.9 89.8 127.5 49.4 176.9

149.5 14.8 164.3 27.3 7.0 34.2 41.2 5.4 46.6 68.5 12.3 80.8

20.8 20.2 41.0 16.4 7.2 23.5 9.0 12.4 21.4 25.4 19.5 44.9

0.0 6.5 6.5 0.0 3.2 3.2 0.0 2.7 2.7 0.0 5.9 5.9

27.9 11.9 39.8 18.9 7.2 26.1 14.7 4.5 19.2 33.6 11.7 45.3

93.7 11.5 105.3 47.5 6.8 54.3 5.0 2.8 7.8 52.5 9.6 62.1

90.2 9.0 99.2 43.5 6.0 49.5 0.0 0.2 0.2 43.5 6.1 49.6

3.5 2.5 6.1 4.0 0.8 4.8 5.0 2.7 7.7 9.0 3.5 12.5

113.9 130.2 244.0 80.5 172.6 253.1 27.6 10.6 38.2 108.2 183.1 291.3

16.1 110.9 127.0 50.8 34.1 84.9 0.0 0.0 0.0 50.8 34.1 84.9

23.9 2.7 26.6 2.3 129.0 131.3 0.0 0.0 0.0 2.3 129.0 131.3

26.3 2.8 29.1 7.2 4.4 11.7 5.4 1.7 7.0 12.6 6.1 18.7

47.5 13.8 61.3 20.2 5.0 25.2 22.3 8.9 31.2 42.5 13.9 56.4

107.9 3.7 111.6 73.9 2.7 76.7 36.7 11.2 47.8 110.6 13.9 124.5

Note: The net increase in disbursed trade credits during the review period is reported in the New Credits and Deposits table, while the netdecrease is reported in Gross Foreign Debt Service table.

Source: BNB.

GROSS FOREIGN DEBT (A+B)

A. Long-term debt



IMF

World Bank

European Union

Other international financial

institutions





Brady bonds

Other bonds

Commercial banks

Other private creditors

B. Short-term debt

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003138NEW CREDITS AND DEPOSITS

(million USD)

By debtor1

2002 2003


474.6 255.1 473.4 728.4

123.0 59.1 266.4 325.5

76.3 50.4 219.2 269.6

76.3 50.4 219.2 269.6

0.0 0.0 0.0 0.0

33.5 6.7 42.5 49.2

33.5 6.7 42.5 49.2

0.0 0.0 0.0 0.0

13.2 2.0 4.7 6.7

7.4 0.0 0.7 0.7

0.0 0.0 0.7 0.7

7.4 0.0 0.0 0.0

5.7 0.5 1.3 1.8

2.7 0.3 1.2 1.4

3.0 0.2 0.1 0.4

0.2 1.5 2.7 4.2

0.2 1.3 0.3 1.6

0.0 0.2 2.5 2.6

0.0 0.0 0.0 0.0

351.6 196.0 207.0 402.9

82.7 67.0 59.9 126.9

3.7 2.2 0.0 2.2

3.1 1.6 6.8 8.4

4.8 10.6 0.0 10.6

71.1 52.6 53.1 105.7

268.9 129.0 147.1 276.1

131.9 52.2 49.4 101.6

137.0 66.8 97.6 164.4

0.0 10.0 0.0 10.0

1 Preliminary data. US dollar equivalent is based on average monthly exchange rates of respective currencies.2 Including loans extended in support of the balance of payments.3 Including cash revenue from the new issue of global bonds (in euro at market value) as a result of swapped Brady bonds for global bonds.4 Source: System of Debt Registration, Service and Management of the Ministry of Finance and the Bulgarian National Bank − preliminary data

as of 8 September 2003.5 In accordance with the international statistical methodology of foreign debt, the BNB has included government guaranteed loans of budget

and nonbudget enterprises in government guaranteed debt.6 Commercial banks data.7 Including credits registered with the BNB and those on which information is available.8 Including government securities (denominated in levs and in foreign currency) bought by nonresidents, as well as revenues from the sale of

secondary market securities (issued and held by residents) to nonresidents less securities bought by residents at the launch of a new issue.

(continued)

Total (А+B) 2

А. Public sector (I+II+III+IV) 3


1. Loans

2. Bonds


Loans

III. BNB 4

IV. Other debtors

Municipalities (1+2)

1. Loans

2. Bonds


1. Loans


Trade companies (1+2) 7


2. Other loans

Other 8




2. Other loans

3. Bonds


II. Trade companies (1+2) 7


2. Other loans

3. Bonds


By creditor

2002 2003


474.6 255.1 473.4 728.4

327.9 144.3 323.1 467.3

144.1 53.5 235.3 288.8

144.1 53.5 235.3 288.8

39.8 35.6 35.6 71.2

25.7 4.4 169.3 173.7

78.6 13.5 30.4 43.9

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

183.8 90.7 87.8 178.5

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

7.4 0.0 0.0 0.0

12.4 14.4 4.8 19.2

164.0 76.4 82.9 159.3

146.7 110.8 150.3 261.1

1 Including only bonds bought by nonresidents.

Source: BNB.

(continued) (million USD)

GROSS FOREIGN DEBT (A+ B)

A. Long-term debt



IMF

World Bank

Other international financial institutions





Brady bonds1

Eurobonds1

Global bonds1

Other bonds1

Commercial banks

Other private creditors

B. Short-term debt

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003140BALANCE SHEET OF THE BNB

(BGN'000)

ISSUE DEPARTMENT 31.I.2003 28.II.2003 31.III.2003 30.IV.2003 31.V.2003 30.VI.2003

8363216 8472845 8602710 9233255 9315714 9451334

1032907 1056635 1314861 1919417 1564035 1571583

640856 640856 640856 640856 640856 640841

6552450 6627781 6505309 6542297 6971212 7081148

137003 147573 141684 130685 139611 157762

8363216 8472845 8602710 9233255 9315714 9451334

3340229 3358823 3328932 3510282 3487783 3617677

702223 757523 760333 764066 581623 686051

2851586 2860191 3086835 3659694 3890758 3773934

153504 151216 92079 82765 75624 95795

3424 4635 4104 5512 6642 945

1312250 1340457 1330427 1210936 1273284 1276932

BANKING DEPARTMENT 31.I.2003 28.II.2003 31.III.2003 30.IV.2003 31.V.2003 30.VI.2003

4855059 4925821 4932336 4803787 4722763 4793604

3721 3509 3350 3283 3353 3287

0 0 0 0 0 0

38 36 36 34 32 33

1882368 1925828 1899180 1912284 1818902 1856477

1512761 1511269 1498823 1477907 1427891 1457312

0 0 0 0 41 105

73134 73134 73134 73134 73134 73134

46582 46356 108566 107789 107477 108549

24205 25232 18820 18420 18649 17775

1312250 1340457 1330427 1210936 1273284 1276932

4855059 4925821 4932336 4803787 4722763 4793604

1921012 1945131 1918324 1931159 1818902 1856477

1512898 1511108 1498671 1477770 1428545 1457945

278 60 97 132 21 22

5332 6439 5941 7386 3632 4109

3439520 3462738 3423033 3416447 3251100 3318553

20000 20000 20000 20000 20000 20000

1201709 1229783 1255423 1289134 1353631 1336826

193830 213300 233880 78206 98032 118225

1415539 1463083 1509303 1387340 1471663 1475051

ASSETS

1. Cash in foreign currency

2. Monetary gold and other instruments in gold*

3. Foreign securities

4. Accrued interest receivable

LIABILITIES

1. Currency in circulation

2. Bank deposits and current accounts

3. Government deposits and accounts

4. Other depositors’ accounts

5. Accrued interest payable

6. Banking Department deposit

ASSETS

1. Nonmonetary gold and other precious metals

2. Investments in securities

3. Loans and advances to banks, net of provisions

4. Receivables from government

5. Bulgaria’s IMF quota and holdings in other

international financial institutions

6. Accrued interest receivable

7. Equity investments in domestic entities

8. Fixed assets

9. Other assets

10. Deposit with Issue Department

LIABILITIES

1. Borrowings from IMF

2. Liabilities to international financial institutions

3. Accrued interest payable

4. Other liabilities

Liabilities, total

5. Capital

6. Reserves

7. Retained profit

Equity, total

* The monetary gold and other instruments in gold are valuated according to Article 28, para. 3, item 6 of the Law on the Bulgarian NationalBank.

Source: BNB.

AAAAAppppppepepepepennnnndixdixdixdixdix 141MONETARY SURVEY

(BGN'000)

XII.2001 VI.2002 XII.2002 I.2003 II.2003 III.2003 IV.2003 V.2003 VI.2003

2.21926 1.96073 1.88496 1.80827 1.81398 1.79516 1.75710 1.65440 1.711591.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583

9453689 8890539 9891674 9344161 9386994 9602403 9619949 9720855 988645512611731 11598765 12751442 12070124 12105206 12387682 12432335 12456435 12702753

567242 215386 191500 194720 186953 194721 204070 216783 2439235106035 3996016 4080991 3666079 3646777 4036822 3972751 3777482 3797445

0 0 0 0 0 0 0 0 05106035 3996016 4080991 3666079 3646777 4036822 3972751 3777482 3797445

0 0 0 0 0 0 0 0 045960 48460 92159 88730 73409 71299 72520 68571 7015118245 16959 13192 13828 14125 14243 14674 15004 1523127715 31501 78967 74902 59284 57056 57846 53567 54920

6094096 6424889 7506077 7233797 7288242 7192628 7202931 7468755 76452880 0 0 0 0 0 0 0 0

6094096 6424889 7506077 7233797 7288242 7192628 7202931 7468755 76452881114 1099 1103 1100 1097 1115 1147 1133 1138

738955 774460 725745 748695 761154 749413 848231 784100 78704558329 138455 153867 137003 147574 141684 130685 139611 157763

0 0 0 0 0 0 0 0 058329 138455 153867 137003 147574 141684 130685 139611 157763

3158042 2708226 2859768 2725963 2718212 2785279 2812386 2735580 2816298431403 414276 579629 479357 476567 556577 560831 598939 608976

76379 72100 84756 76555 72692 75459 81571 88089 93060355024 342176 494873 402802 403875 481118 479260 510850 515916

0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

2725914 2293504 2279939 2226770 2241585 2228605 2251423 2136620 21911642667 2667 0 0 0 0 0 0 0

2723247 2290837 2279939 2226770 2241585 2228605 2251423 2136620 21911640 0 0 19558 0 0 0 0 16136

725 446 200 278 60 97 132 21 220 0 0 0 0 0 0 0 0

725 446 200 278 60 97 132 21 222967853 3273909 4075175 4395077 4546444 4209176 4442434 4374586.996 46283056009434 6247090 7661304 7860966 8121200 8159299 7904038 7678589.211 81344191566563 1142271 1264125 1429458 1520170 1337588 724541 241447 3723851527004 1135759 1251641 1418045 1508491 1325641 711804 228661 3593953652607 3782464 3871908 3885612 3993565 4045804 4000368 3843272 39494471336437 1786084 1945505 2003244 2067737 2146624 2088084 2024370 2092970

906731 1047253 1163173 1244572 1233940 1219504 1172955 1184196 1189401429706 738831 782332 758672 833797 927120 915129 840174 903569

2316170 1996380 1926403 1882368 1925828 1899180 1912284 1818902 18564771600 0 0 0 0 0 0 0 0

2314570 1996380 1926403 1882368 1925828 1899180 1912284 1818902 18564772125603 2646705 2620267 2467567 2485074 2720163 3288564 3614611 35900522097875 2623549 2597360 2445641 2460284 2695775 3266019 3590601 3559690

751124 809538 680434 840600 813149 924830 1117392 1515724 15025281346751 1814011 1916926 1605041 1647135 1770945 2148627 2074877 2057162

27728 23156 22907 21926 24790 24388 22545 24010 3036222728 19156 19907 18926 21790 21388 20545 22010 28362

5000 4000 3000 3000 3000 3000 2000 2000 200039559 6512 12484 11413 11679 11947 12737 12786 1299035772 0 3998 2740 2732 2453 3357 3380 3429

0 0 199 197 197 194 1234 1231 123035772 0 3799 2543 2535 2259 2123 2149 2199

(continued)

Exchange rate: BGN/USD 1 BGN/EUR 1

NET FOREIGN ASSETS (S.2)Foreign assetsCashDepositsBGNForeign currenciesRepo agreementsCreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityMonetary gold and SDR holdings*Claims on interestBGNForeign currenciesLess: foreign liabilitiesDepositsBGNForeign currenciesRepo agreementsBGNForeign currenciesCreditsBGNForeign currenciesDebt securities issuedInterest liabilitiesBGNForeign currenciesNET DOMESTIC ASSETSDOMESTIC CREDIT (S.1)CLAIMS ON GENERAL GOVERNMENT (S.13)Central government, net (S.1311)ClaimsGovernment securitiesBGNForeign currenciesCreditsBGNForeign currenciesLess: liabilitiesDepositsBGNForeign currenciesCreditsBGNForeign currenciesLocal government (S.1313)Securities other than sharesBGNForeign currencies


3787 6512 8486 8673 8947 9494 9380 9406 95613787 6512 8486 8673 8947 9494 9380 9406 9561

0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

4442871 5104819 6397179 6431508 6601030 6821711 7179497 7437142.211 7762034202219 308120 333745 328249 342183 346411 361903 352149 336332169764 211154 215935 219215 229954 235631 246234 245746 231489

90099 135590 158871 157926 165030 169752 175508 171302 15541579665 75564 57064 61289 64924 65879 70726 74444 7607420824 20243 44681 35907 39036 37673 42197 31952 2262920824 20243 44681 35907 39036 37673 42197 31952 22629

0 0 0 0 0 0 0 0 011631 76723 73129 73127 73193 73107 73472 74451 8221411631 76723 73129 73127 73193 73107 73472 74451 82214

0 0 0 0 0 0 0 0 0

3319398 3731065 4718913 4735760 4830355 4981888 5235355 5411684 56417923290963 3702339 4700997 4715900 4800569 4949708 5202209 5377904 56042041871573 1943005 2247685 2237607 2272381 2343652 2375626 2465055 24629441419390 1759334 2453312 2478293 2528188 2606056 2826583 2912849 3141260

10256 9249 1241 1170 1964 3931 5234 5342 90296060 7104 1241 1170 1964 3931 3771 3743 37314196 2145 0 0 0 0 1463 1599 5298

18179 19477 16675 18690 27822 28249 27912 28438 2855918179 19477 16675 18690 27822 28249 27912 28438 28559

0 0 0 0 0 0 0 0 0861765 993405 1241560 1260492 1300531 1355108 1438127 1532501.211 1645779861765 993405 1241560 1260492 1300531 1355108 1438127 1532501.211 1645779830073 954930 1179972 1198010 1232977 1282114 1359335 1452981 1558953

31692 38475 61588 62482 67554 72994 78792 79520.21085 86826

59489 72229 102961 107007 127961 138304 144112 140808 13813152135 65007 92249 96295 113206 122316 127958 124648 121991

8129 13895 22060 28579 36528 34412 28943 29954 3020844006 51112 70189 67716 76678 87904 99015 94694 91783

0 0 0 0 0 978 978 978 9780 0 0 0 0 0 0 0 00 0 0 0 0 978 978 978 978

7354 7222 10712 10712 14755 15010 15176 15182 151627354 7222 10712 10712 14755 15010 15176 15182 15162

0 0 0 0 0 0 0 0 0-2867164 -2802475 -3292827 -3417054 -3528495 -3591541 -3433541 -3523062 -3581320

-882483 -955471 -956717 -965717 -947033 -943697 -943697 -953476 -965476-1425271 -1457624 -1750572 -1774944 -1823492 -1857320 -2019767 -2140103 -2142193

-559410 -389380 -585538 -676393 -757970 -790524 -470077 -429483 -473651-174417 -170706 -293302 -48835 -46261 -358582 -28063 219059.7856 75206

-53933 -32917 -79756 -6828 -46059 -40471 -46310 -50509.00359 -28845-42335 -18230 -45567 -6852 -17464 -8924 -22116 -11133 -9639-11598 -14687 -34189 24 -28595 -31547 -24194 -39376.00359 -19206-69617 -78921 -161301 34191 102401 -127552 110463 265691.7892 112840-54856 -62580 28112 122909 154067 224092 205817 350095.7892 290349-14761 -16341 -189413 -88718 -51666 -351644 -95354 -84404 -177509-50867 -58868 -52245 -76198 -102603 -190559 -92216 3877 -8789-80096 -76638 -27155 -91619 -108982 -194535 -98845 -2501 -1454129229 17770 -25090 15421 6379 3976 6629 6378 5752

(continued) (BGN'000)

(continued)


CreditsBGNForeign currenciesSocial security funds (S.1314)CreditsBGNForeign currenciesCLAIMS ON NONGOVERNMENT SECTORNonfinancial public corporations (S.11001)CreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesNonfinancial private corporations(S.11002+S.11003)CreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesHouseholds (S.14)CreditsBGNForeign currenciesNonbank financial institutions(S.123+S.124+S.125)CreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesCAPITAL AND RESERVESFunds contributed by ownersReservesFinancial resultOTHER ITEMS (net)Interbank accounts (net)BGNForeign currenciesOther assets and liabilities (net)BGNForeign currenciesAccounts between BNB and CBsBGNForeign currencies

AAAAAppppppepepepepennnnndixdixdixdixdix 143(continued) (BGN'000)

(continued)


12421542 12164448 13966849 13739238 13933438 13811579 14062383 14095442 145147604883210 4401391 5542315 5141207 5235001 5087066 5272317 5371376 55830493081023 2828354 3334922 3112954 3132418 3088306 3200366 3248348 33556451802187 1573037 2207393 2028253 2102583 1998760 2071951 2123028 2227404

71282 106961 73853 89070 95364 113920 117484 118289 126140147453 79209 121008 68539 64948 65589 145210 100042 105603302873 190498 302939 275496 301174 245750 267237 234822 258017

957356 835551 1229627 1099271 1125845 1076325 1018531 1137453 1178339300194 336077 441763 440858 465283 448219 478946 484221 510645

23029 24741 38203 55019 49969 48957 44543 48201 4866012076506 11842823 13553400 13239399 13388279 13156335 13401676 13415076 13867742

7193296 7441432 8011085 8098192 8153278 8069269 8129359 8043700 8284693

1888202 2059681 2204149 2271881 2245865 2128855 2161931 2178038 221759610803 17029 14704 26077 25714 25491 26652 24412 21689

630000 730000 700000 730000 730000 730000 730000 730000 730000103249 122235 173213 162211 144534 151431 146672 135483 150802

265275 236434 321173 325251 306305 177547 200830 218777 220796788014 845585 916414 946632 968566 971314 980892 1000484 1026867

90861 108399 78645 81710 70746 73072 76885 68882 6744212278 45464 73794 80824 82374 83336 92411 94081 98442

0 0 200 280 384 384 384 384 384

1379 1456 3042 3441 3548 3574 2541 2364 240110899 18090 23983 26534 27873 28809 37886 38627 39907

0 25917 46569 50569 50569 50569 51600 52706 55750547774 563567 645331 650640 657130 655296 660726 672786 686679

4745042 4772720 5087811 5094847 5167909 5201782 5214291 5098795 52819761149834 1135296 1153898 1150219 1141551 1187196 1162247 1188187 1251312

725 5213 5885 6029 5957 6508 6097 5388 506412596 2200 10666 874 889 902 854 802 812

319688 263021 236213 250743 234034 210640 241276 289633 335317

526397 584696 596167 598477 604983 665214 609211 598849 602270284578 272527 293160 283378 285345 289228 285793 275936 295526

5850 7639 11807 10718 10343 14704 19016 17579 12323

2908703 2973798 3183710 3194870 3260274 3236446 3264842 3141350 32238244 4 3 3 3 3 3 260 2610 8856 0 9484 9495 9458 9342 9116 9242

176972 274539 240862 259758 266165 230809 270078 220275 201471

271733 250594 304296 303361 332735 338683 338476 334547 3283712396490 2402476 2596574 2581990 2612117 2617473 2608775 2525740 2620674

63504 37329 41975 40274 39759 40020 38168 51412 638052189 3950 19539 29841 33118 36003 39057 41136 455991465 1294 1244 1193 1199 1187 1162 1094 1132

436 1059 5021 9923 9704 10221 7090 7126 802417 1312 9078 14524 16881 18670 20319 22174 25269

266 285 4196 4201 5334 5925 10486 10742 11174

BROAD MONEY М3MONEY M1Currency outside banksOvernight deposits (BGN)Local government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)MONEY М2 (М1 + quasi-money)Quasi-moneyTime deposits with a term of over 1 dayto 2 years (BGN)Local government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Time deposits with a term of over 2 years (BGN)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Savings deposits of households (S.14), BGNForeign currency depositsOvernight depositsLocal government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Time deposits with a term of over 1 dayto 2 yearsLocal government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Time deposits with a term of over 2 yearsNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)


(continued)



684321 659676 730664 719917 732966 742137 748145 728122 761241

12421542 12164448 13966849 13739238 13933438 13811579 14062383 14095442 145147600 0 0 59816 62974 117918 135910 157898 1278830 0 0 50634 55556 113840 125525 138970 1146470 0 0 11134 6518 39935 28616 34529 31258

0 0 0 0 0 0 3784 2702 10000 0 0 0 0 0 0 0 0

0 0 0 39500 49038 73905 93125 101739 823890 0 0 9182 7418 4078 10385 18928 132360 0 0 0 0 0 0 0 0

0 0 0 2639 2860 1489 8156 11472 106620 0 0 0 362 360 0 333 345

0 0 0 6543 4196 2229 2229 7123 2229

0 1675 3075 1675 3075 2740 2740 2740 24050 1675 3075 1675 3075 2740 2740 2740 24050 0 0 0 0 0 0 0 0

0 1505 1505 1505 1505 1204 1204 1204 9030 70 70 70 70 56 56 56 42

0 100 1500 100 1500 1480 1480 1480 14600 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 06341 11666 15962 15962 29153 29810 29810 33624 42834

0 5325 5325 5325 5325 5325 5325 5325 53250 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

0 5325 5325 5325 5325 5325 5325 5325 53256341 6341 10637 10637 23828 24485 24485 28299 37509

0 0 0 0 0 0 0 0 0

196 0 880 880 880 1111 1111 1111 15610 10 514 514 706 986 986 986 1091

6145 6331 9243 9243 22242 22388 22388 26202 3485754081 26535 15848 11310 11455 11181 11180 11007 1113527147 24474 12299 6193 6329 6038 6084 6042 6107

8175 9547 10084 0 0 0 0 0 0

18434 14920 213 241 286 273 319 277 2670 0 0 0 0 0 0 0 0

538 7 2002 5952 6043 5765 5765 5765 584026934 2061 3549 5117 5126 5143 5096 4965 5028

Savings deposits of households (S.14),foreign currenciesMONEY М3 (М2+ repo agreements, debtsecurities issued, credits and restricteddeposits)Repo agreementsBGNNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currenciesNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Debt securities issued with a term ofup to 2 yearsBGNNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currenciesNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Debt securities with a term of over 2 yearsBGNNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currenciesNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Credits with a term of up to 2 yearsBGNNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currencies


0 0 0 0 0 0 0 0 0

26678 2061 3549 79 81 80 79 74 300 0 0 0 0 0 0 0 0

256 0 0 5038 5045 5063 5017 4891 4998228 227 227 226 226 226 226 345 359

0 0 0 0 0 0 0 120 1330 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 120 133228 227 227 226 226 226 226 225 226

0 0 0 0 0 0 0 0 0

215 214 214 213 213 213 213 213 21313 13 13 13 13 13 13 12 13

0 0 0 0 0 0 0 0 0284386 281522 378337 410850 438276 493369 480841 474752 462402135007 163061 232644 262556 284853 299523 337967 342858 306718

14417 19144 27280 23436 23919 25047 26487 26226 2563013328 28259 36022 34013 37693 43898 60733 39243 3791624142 65977 43607 49944 51393 69496 71990 72121 53917

62788 38612 110094 144419 142887 150422 165368 183112 1747016315 5611 5932 6189 6126 6557 8335 14227 7813

14017 5458 9709 4555 22835 4103 5054 7929 6741149379 118461 145693 148294 153423 193846 142874 131894 155684

609 798 440 435 451 444 518 421 2190 0 0 0 0 0 0 0 0

53778 39160 35103 32795 30512 29050 27813 27861 42072

81699 63202 96453 94676 105311 147876 97807 87667 959488774 8451 9605 10085 11867 10864 10789 11614 13519

4519 6850 4092 10303 5282 5612 5947 4331 3926



Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Credits with a term of over 2 yearsBGNNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currenciesNonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Restricted depositsBGNLocal government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)Foreign currenciesLocal government (S.1313)Social security funds (S.1314)Nonfinancial public corporations (S.11001)Nonfinancial private corporations(S.11002+S.11003)Households (S.14)Nonbank financial institutions(S.123+S.124+S.125)

*Reserve position in the IMF included.

Source: BNB and commercial banks.

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003146ANALYTICAL REPORTING OF THE BNB

(BGN'000)


2.21926 1.96073 1.88496 1.80827 1.81398 1.79516 1.75710 1.65440 1.711591.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583

12 318 512 11 780 464 12 638 459 11 936 311 12 088 879 12 230 503 12 852 436 12 791 990 12 994 9407 946 430 7 909 194 8 948 321 8 364 048 8 473 676 8 603 542 9 234 087 9 316 544 9 452 167

157 867 9 169 6 483 13 047 12 091 10 908 22 216 23 594 27 1851 490 334 1 252 812 1 292 275 993 612 1 005 754 1 276 233 1 769 532 1 474 197 1 476 787

- - - - - - - - -5 500 113 5 733 466 6 769 119 6 470 859 6 546 271 6 424 472 6 462 591 6 894 210 7 002 555

832 832 832 832 832 832 832 832 832738 955 774 460 725 745 748 695 761 154 749 413 848 231 784 100 787 045

58 329 138 455 153 867 137 003 147 574 141 684 130 685 139 611 157 76336 496 27 457 24 357 6 835 6 833 6 833 6 831 6 829 6 830

- - - - - - - - -13 27 41 38 36 36 34 32 33

36 114 27 061 24 160 6 797 6 797 6 797 6 797 6 797 6 79717 955 8 902 8 902 421 421 421 421 421 42118 159 18 159 15 258 6 376 6 376 6 376 6 376 6 376 6 376

369 369 156 - - - - - - - - - - - - - - -

2 314 570 1 996 380 1 926 403 1 882 368 1 925 828 1 899 180 1 912 284 1 818 902 1 856 4772 314 570 1 996 380 1 926 403 1 882 368 1 925 828 1 899 180 1 912 284 1 818 902 1 856 477

- - - - - - - - - - - - - - - - - -

2 314 570 1 996 380 1 926 403 1 882 368 1 925 828 1 899 180 1 912 284 1 818 902 1 856 477 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

630 000 730 000 700 000 730 000 730 000 730 000 730 000 730 000 730 000 - - - - - - - - - - - - - - - - - - - - - - - - - - -

192 057 216 617 162 812 153 162 151 068 83 959 82 399 75 509 95 234123 254 28 518 43 168 33 521 31 426 19 082 17 523 10 638 30 360

1 564 1 256 - - - - - - -121 690 27 262 43 168 33 521 31 426 19 082 17 523 10 638 30 360

- - - - - - - - - - - - - - - - - - - - - - - - - - -

68 803 188 099 119 644 119 641 119 642 64 877 64 876 64 871 64 874 - - 338 335 336 335 334 329 332

13 352 28 296 36 022 34 009 37 685 41 889 39 181 38 859 37 91613 328 28 250 36 022 34 009 37 685 41 889 39 181 38 859 37 916

- - - - - - - - -24 46 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2 461 241 2 077 826 1 966 151 1 921 290 1 945 191 1 918 421 1 931 291 1 818 923 1 856 499 - - - - - - - - - - - - - - - - - -

1 777 998 2 186 702 2 172 731 2 025 165 2 034 478 2 255 230 2 819 963 3 041 927 2 902 962642 777 676 524 518 706 677 297 632 774 750 409 926 209 1 208 527 1 091 421


ASSETSFOREIGN ASSETSCashDepositsRepo agreementsSecurities other than sharesShares and other equityMonetary gold and SDR holdingsClaims on interestCLAIMS ON COMMERCIAL BANKSBGNForeign currenciesCreditsBGNForeign currenciesShares and other equityForeign currenciesCLAIMS ON GENERAL GOVERNMENTCentral governmentGovernment securitiesBGNForeign currenciesCreditsNonfinancial private corporationsCreditsBGNForeign currenciesSocial security fundsNonfinancial public corporationsNonfinancial private corporationsNonbank financial institutionsFOREIGN CURRENCY DEPOSITSOvernignt depositsSocial security fundsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsTime depositsNonbank financial institutionsRESTRICTED DEPOSITSSocial security fundsForeign currenciesBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesBGNForeign currenciesCREDITSNonfinancial public corporationsNonfinancial private corporationsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesFOREIGN LIABILITIESBGNForeign currenciesDepositsBGN

Source: BNB.


(continued)


ANALYTICAL REPORTING OF COMMERCIAL BANKS(BGN'000)

2.21926 1.96073 1.88496 1.80827 1.81398 1.79516 1.75710 1.65440 1.711591.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583 1.95583

12 852 727 12 971 932 15 155 910 14 961 640 15 132 667 15 531 824 15 314 181 15 331 954 16 024 4444 665 301 3 689 571 3 803 121 3 706 076 3 631 530 3 784 140 3 198 248 3 139 891 3 250 586

409 375 206 217 185 017 181 673 174 862 183 813 181 854 193 189 216 7383 615 701 2 743 204 2 788 716 2 672 467 2 641 023 2 760 589 2 203 219 2 303 285 2 320 658

45 960 48 460 92 159 88 730 73 409 71 299 72 520 68 571 70 151593 983 691 423 736 958 762 938 741 971 768 156 740 340 574 545 642 733

- - - - - - - - -593 983 691 423 736 958 762 938 741 971 768 156 740 340 574 545 642 733

282 267 271 268 265 283 315 301 306864 441 777 625 1 071 151 846 756 874 783 803 855 975 220 818 393 932 747181 859 194 386 293 005 227 275 226 405 240 626 309 916 239 436 262 033682 582 583 239 778 146 619 481 648 378 563 229 665 304 578 957 670 714358 955 231 281 558 608 506 568 474 013 270 509 306 147 291 334 340 687323 627 351 958 219 538 112 913 174 365 292 720 359 157 287 623 330 027

1 377 596 1 792 596 1 957 989 2 014 657 2 079 416 2 158 571 2 100 821 2 037 156 2 105 9601 338 037 1 786 084 1 945 505 2 003 244 2 067 737 2 146 624 2 088 084 2 024 370 2 092 9701 336 437 1 786 084 1 945 505 2 003 244 2 067 737 2 146 624 2 088 084 2 024 370 2 092 970

906 731 1 047 253 1 163 173 1 244 572 1 233 940 1 219 504 1 172 955 1 184 196 1 189 401429 706 738 831 782 332 758 672 833 797 927 120 915 129 840 174 903 569

1 600 - - - - - - - -1 600 - - - - - - - -

- - - - - - - - -39 559 6 512 12 484 11 413 11 679 11 947 12 737 12 786 12 99035 772 - 3 998 2 740 2 732 2 453 3 357 3 380 3 429

- - 199 197 197 194 1 234 1 231 1 23035 772 - 3 799 2 543 2 535 2 259 2 123 2 149 2 199

3 787 6 512 8 486 8 673 8 947 9 494 9 380 9 406 9 5613 787 6 512 8 486 8 673 8 947 9 494 9 380 9 406 9 561

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

4 440 577 5 034 835 6 324 045 6 358 374 6 527 896 6 748 577 7 106 363 7 364 008 7 688 900199 925 238 136 263 111 257 615 271 549 275 777 291 269 281 515 265 698169 764 211 154 215 935 219 215 229 954 235 631 246 234 245 746 231 489

90 099 135 590 158 871 157 926 165 030 169 752 175 508 171 302 155 41579 665 75 564 57 064 61 289 64 924 65 879 70 726 74 444 76 07420 824 20 243 44 681 35 907 39 036 37 673 42 197 31 952 22 62920 824 20 243 44 681 35 907 39 036 37 673 42 197 31 952 22 629

- - - - - - - - -9 337 6 739 2 495 2 493 2 559 2 473 2 838 3 817 11 5809 337 6 739 2 495 2 493 2 559 2 473 2 838 3 817 11 580

- - - - - - - - -3 319 398 3 731 065 4 718 913 4 735 760 4 830 355 4 981 888 5 235 355 5 411 684 5 641 7923 290 963 3 702 339 4 700 997 4 715 900 4 800 569 4 949 708 5 202 209 5 377 904 5 604 2041 871 573 1 943 005 2 247 685 2 237 607 2 272 381 2 343 652 2 375 626 2 465 055 2 462 9441 419 390 1 759 334 2 453 312 2 478 293 2 528 188 2 606 056 2 826 583 2 912 849 3 141 260

10 256 9 249 1 241 1 170 1 964 3 931 5 234 5 342 9 0296 060 7 104 1 241 1 170 1 964 3 931 3 771 3 743 3 7314 196 2 145 - - - - 1 463 1 599 5 298

18 179 19 477 16 675 18 690 27 822 28 249 27 912 28 438 28 55918 179 19 477 16 675 18 690 27 822 28 249 27 912 28 438 28 559

- - - - - - - - -861 765 993 405 1 241 560 1 260 492 1 300 531 1 355 108 1 438 127 1 532 501 1 645 779861 765 993 405 1 241 560 1 260 492 1 300 531 1 355 108 1 438 127 1 532 501 1 645 779


ASSETSFOREIGN ASSETSCashDepositsCreditsSecurities other than sharesBGNForeign currenciesShares and other equityRESERVESCashDepositsBGNForeign currenciesCLAIMS ON GENERAL GOVERNMENTCentral governmentGovernment securitiesBGNForeign currenciesCreditsBGNForeign currenciesLocal governmentSecurities other than sharesBGNForeign currenciesCreditsBGNForeign currenciesSocial security fundsCreditsBGNForeign currenciesCLAIMS ON NONGOVERNMENT SECTORNONFINANCIAL PUBLIC CORPORATIONSCreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesNONFINANCIAL PRIVATE CORPORATIONSCreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesHOUSEHOLDSCredits


(continued)



830 073 954 930 1 179 972 1 198 010 1 232 977 1 282 114 1 359 335 1 452 981 1 558 95331 692 38 475 61 588 62 482 67 554 72 994 78 792 79 520 86 82659 489 72 229 100 461 104 507 125 461 135 804 141 612 138 308 135 63152 135 65 007 92 249 96 295 113 206 122 316 127 958 124 648 121 991

8 129 13 895 22 060 28 579 36 528 34 412 28 943 29 954 30 20844 006 51 112 70 189 67 716 76 678 87 904 99 015 94 694 91 783

- - - - - 978 978 978 978 - - - - - - - - - - - - - - 978 978 978 978

7 354 7 222 8 212 8 212 12 255 12 510 12 676 12 682 12 6627 354 7 222 8 212 8 212 12 255 12 510 12 676 12 682 12 662

- - - - - - - - -706 531 742 264 884 061 911 476 963 730 946 120 961 719 969 925 970 364798 281 935 041 1 115 543 1 124 301 1 055 312 1 090 561 971 810 1 002 581 1 075 887502 735 565 051 708 092 705 430 584 085 576 703 487 358 531 979 588 655469 151 495 414 625 007 605 230 519 782 475 914 386 138 426 166 483 721221 421 160 410 203 365 243 209 190 766 221 258 146 695 149 622 137 955247 730 335 004 421 642 362 021 329 016 254 656 239 443 276 544 345 766

20 037 38 138 57 684 55 513 36 514 73 210 70 596 65 676 44 41519 030 20 058 38 550 47 804 35 798 69 990 63 092 62 670 42 559

1 007 18 080 19 134 7 709 716 3 220 7 504 3 006 1 8567 615 24 898 20 329 39 617 22 719 22 031 25 073 34 591 54 969

- 11 444 10 463 10 565 10 361 10 362 10 167 10 094 10 1357 615 13 454 9 866 29 052 12 358 11 669 14 906 24 497 44 8345 932 6 601 5 072 5 070 5 070 5 548 5 551 5 546 5 5505 932 6 601 5 072 5 070 5 070 5 548 5 551 5 546 5 550

- - - - - - - - -295 546 369 990 407 451 418 871 471 227 513 858 484 452 470 602 487 232161 619 225 773 196 250 209 941 220 620 256 944 243 749 235 349 250 388133 927 144 217 211 201 208 930 250 607 256 914 240 703 235 253 236 844

12 852 727 12 971 932 15 155 910 14 961 640 15 132 667 15 531 824 15 314 181 15 331 954 16 024 4443 473 008 3 441 590 4 309 415 4 239 269 4 300 005 4 070 660 4 188 292 4 258 139 4 401 3031 654 754 1 502 878 2 086 141 1 965 924 2 044 636 1 933 173 2 003 224 2 043 234 2 128 586

71 282 106 961 73 853 89 070 95 364 113 920 117 484 118 289 126 14041 9 118 - 6 552 7 149 8 122 76 848 20 363 7 345

302 873 190 498 302 939 275 496 301 174 245 750 267 237 234 822 258 017957 356 835 551 1 229 627 1 099 271 1 125 845 1 076 325 1 018 531 1 137 453 1 178 339300 194 336 077 441 763 440 858 465 283 448 219 478 946 484 221 510 645

23 008 24 673 37 959 54 677 49 821 40 837 44 178 48 086 48 100

1 258 202 1 329 681 1 504 149 1 541 881 1 515 865 1 398 855 1 431 931 1 448 038 1 487 59610 803 17 029 14 704 26 077 25 714 25 491 26 652 24 412 21 689

- - - - - - - - -103 249 122 235 173 213 162 211 144 534 151 431 146 672 135 483 150 802265 275 236 434 321 173 325 251 306 305 177 547 200 830 218 777 220 796788 014 845 585 916 414 946 632 968 566 971 314 980 892 1 000 484 1 026 867

90 861 108 399 78 645 81 710 70 746 73 072 76 885 68 882 67 44212 278 45 464 73 794 80 824 82 374 83 336 92 411 94 081 98 442

- - 200 280 384 384 384 384 3841 379 1 456 3 042 3 441 3 548 3 574 2 541 2 364 2 401

10 899 18 090 23 983 26 534 27 873 28 809 37 886 38 627 39 907 - 25 917 46 569 50 569 50 569 50 569 51 600 52 706 55 750

547 774 563 567 645 331 650 640 657 130 655 296 660 726 672 786 686 6794 552 985 4 556 103 4 924 999 4 941 685 5 016 841 5 117 823 5 131 892 5 023 286 5 186 7421 026 580 1 106 778 1 110 730 1 116 698 1 110 125 1 168 114 1 144 724 1 177 549 1 220 952

725 5 213 5 885 6 029 5 957 6 508 6 097 5 388 5 06411 032 944 10 666 874 889 902 854 802 812

197 998 235 759 193 045 217 222 202 608 191 558 223 753 278 995 304 957526 397 584 696 596 167 598 477 604 983 665 214 609 211 598 849 602 270

BGNForeign currenciesNONBANK FINANCIAL INSTITUTIONSCreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesFIXED ASSETSOTHER ASSETSClaims on commercial banksDepositsBGNForeign currenciesCreditsBGNForeign currenciesSecurities other than sharesBGNForeign currenciesShares and other equityBGNForeign currenciesOther unclassified assetsBGNForeign currencies

LIABILITIESLEV DEPOSITSOvernight depositsLocal governmentSocial security fundsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsTime deposits with a term of over 1 dayto 2 yearsLocal governmentSocial security fundsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsTime deposits with a term of over 2 yearsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsSavings deposits of householdsFOREIGN CURRENCY DEPOSITSOvernight depositsLocal governmentSocial security fundsNonfinancial public corporationsNonfinancial private corporations


(continued)



284 578 272 527 293 160 283 378 285 345 289 228 285 793 275 936 295 5265 850 7 639 11 807 10 718 10 343 14 704 19 016 17 579 12 323

2 839 900 2 785 699 3 064 066 3 075 229 3 140 632 3 171 569 3 199 966 3 076 479 3 158 9504 4 3 3 3 3 3 260 261 - 8 856 - 9 484 9 495 9 458 9 342 9 116 9 242

108 169 86 440 121 556 140 452 146 859 166 267 205 536 155 733 136 929271 733 250 594 304 296 303 361 332 735 338 683 338 476 334 547 328 371

2 396 490 2 402 476 2 596 574 2 581 990 2 612 117 2 617 473 2 608 775 2 525 740 2 620 67463 504 37 329 41 637 39 939 39 423 39 685 37 834 51 083 63 473

2 184 3 950 19 539 29 841 33 118 36 003 39 057 41 136 45 5991 465 1 294 1 244 1 193 1 199 1 187 1 162 1 094 1 132

436 1 059 5 021 9 923 9 704 10 221 7 090 7 126 8 02417 1 312 9 078 14 524 16 881 18 670 20 319 22 174 25 269

266 285 4 196 4 201 5 334 5 925 10 486 10 742 11 174684 321 659 676 730 664 719 917 732 966 742 137 748 145 728 122 761 241

- - - 59 816 62 974 117 918 135 910 157 898 127 883 - - - 11 134 6 518 39 935 28 616 34 529 31 258 - - - 11 134 6 518 39 935 28 616 34 529 31 258 - - - - - - - - - - - - 2 639 2 860 1 489 11 940 14 174 11 662 - - - - - - 3 784 2 702 1 000 - - - 2 639 2 860 1 489 8 156 11 472 10 662 - - - - 362 360 - 333 345 - - - - - - - - - - - - - 362 360 - 333 345 - - - 46 043 53 234 76 134 95 354 108 862 84 618 - - - 39 500 49 038 73 905 93 125 101 739 82 389 - - - 6 543 4 196 2 229 2 229 7 123 2 229

- 1 675 3 075 1 675 3 075 2 740 2 740 2 740 2 405 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 505 1 505 1 505 1 505 1 204 1 204 1 204 903 - 1 505 1 505 1 505 1 505 1 204 1 204 1 204 903 - - - - - - - - - - 70 70 70 70 56 56 56 42 - 70 70 70 70 56 56 56 42 - - - - - - - - - - 100 1 500 100 1 500 1 480 1 480 1 480 1 460 - 100 1 500 100 1 500 1 480 1 480 1 480 1 460 - - - - - - - - -

6 341 11 666 15 962 15 962 29 153 29 810 29 810 33 624 42 834 - - - - - - - - - - - - - - - - - - - - - - - - - - -

196 - 880 880 880 1 111 1 111 1 111 1 561 - - - - - - - - -

196 - 880 880 880 1 111 1 111 1 111 1 561 - 10 514 514 706 986 986 986 1 091 - - - - - - - - - - 10 514 514 706 986 986 986 1 091

6 145 11 656 14 568 14 568 27 567 27 713 27 713 31 527 40 182 - 5 325 5 325 5 325 5 325 5 325 5 325 5 325 5 325

6 145 6 331 9 243 9 243 22 242 22 388 22 388 26 202 34 85754 081 26 535 15 848 11 310 11 455 11 181 11 180 11 007 11 135

8 175 9 547 10 084 - - - - - -

HouseholdsNonbank financial institutionsTime deposits with a term of over 1 dayto 2 yearsLocal governmentSocial security fundsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsTime deposits with a term of over 2 yearsNonfinancial public corporationsNonfinancial private corporationsHouseholdsNonbank financial institutionsSavings deposits of householdsREPO AGREEMENTSNonfinancial public corporationsBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesDEBT SECURITIES WITH A TERM OFUP TO 2 YEARSNonfinancial public corporationsBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesDEBT SECURITIES WITH A TERM OFOVER 2 YEARSNonfinancial public corporationsBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesCREDITS WITH A TERM OF UP TO 2 YEARSNonfinancial public corporations


(continued)



8 175 9 547 10 084 - - - - - - - - - - - - - - -

45 112 16 981 3 762 320 367 353 398 351 29718 434 14 920 213 241 286 273 319 277 26726 678 2 061 3 549 79 81 80 79 74 30

- - - - - - - - - - - - - - - - - - - - - - - - - - -

794 7 2 002 10 990 11 088 10 828 10 782 10 656 10 838538 7 2 002 5 952 6 043 5 765 5 765 5 765 5 840256 - - 5 038 5 045 5 063 5 017 4 891 4 998228 227 227 226 226 226 226 345 359

- - - - - - - - - - - - - - - - - - - - - - - - - - -

215 214 214 213 213 213 213 213 213 - - - - - - - - -

215 214 214 213 213 213 213 213 21313 13 13 13 13 13 13 12 13 - - - - - - - - -

13 13 13 13 13 13 13 12 13 - - - - - - - 120 133 - - - - - - - 120 133 - - - - - - - - -

271 034 253 226 342 315 376 841 400 591 451 480 441 660 435 893 424 48615 026 19 942 27 720 23 871 24 370 25 491 27 005 26 647 25 84914 417 19 144 27 280 23 436 23 919 25 047 26 487 26 226 25 630

609 798 440 435 451 444 518 421 219 - 9 - 4 8 2 009 21 552 384 - - 9 - 4 8 2 009 21 552 384 - - - - - - - - - -

77 896 105 091 78 710 82 739 81 905 98 546 99 803 99 982 95 98924 118 65 931 43 607 49 944 51 393 69 496 71 990 72 121 53 91753 778 39 160 35 103 32 795 30 512 29 050 27 813 27 861 42 072

144 487 101 814 206 547 239 095 248 198 298 298 263 175 270 779 270 64962 788 38 612 110 094 144 419 142 887 150 422 165 368 183 112 174 70181 699 63 202 96 453 94 676 105 311 147 876 97 807 87 667 95 94815 089 14 062 15 537 16 274 17 993 17 421 19 124 25 841 21 332

6 315 5 611 5 932 6 189 6 126 6 557 8 335 14 227 7 8138 774 8 451 9 605 10 085 11 867 10 864 10 789 11 614 13 519

18 536 12 308 13 801 14 858 28 117 9 715 11 001 12 260 10 66714 017 5 458 9 709 4 555 22 835 4 103 5 054 7 929 6 741

4 519 6 850 4 092 10 303 5 282 5 612 5 947 4 331 3 926696 801 630 400 893 617 804 673 773 021 866 858 881 095 916 657 959 799431 403 414 276 579 629 479 357 476 567 556 577 560 831 598 939 608 976

76 379 72 100 84 756 76 555 72 692 75 459 81 571 88 089 93 060355 024 342 176 494 873 402 802 403 875 481 118 479 260 510 850 515 916

- - - - - - - - - - - - - - - - - - - - - - - - - - -

265 398 216 124 313 988 305 758 296 454 310 281 320 264 317 718 334 6872 667 2 667 - - - - - - -

262 731 213 457 313 988 305 758 296 454 310 281 320 264 317 718 334 687 - - - 19 558 - - - - 16 136 - - - - - - - - - - - - 19 558 - - - - 16 136

347 605 460 003 447 536 442 402 450 596 464 933 468 601 572 684 687 090319 877 436 847 424 629 420 476 425 806 440 545 446 056 548 674 656 728108 347 133 014 161 728 163 303 180 375 174 421 191 183 307 197 411 107

BGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesCREDITS WITH A TERM OF OVER 2 YEARSNonfinancial public corporationsBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesRESTRICTED DEPOSITSLocal governmentBGNForeign currenciesSocial security fundsBGNForeign currenciesNonfinancial public corporationsBGNForeign currenciesNonfinancial private corporationsBGNForeign currenciesHouseholdsBGNForeign currenciesNonbank financial institutionsBGNForeign currenciesFOREIGN LIABILITIESDepositsBGNForeign currenciesRepo agreementsBGNForeign currenciesCreditsBGNForeign currenciesDebt securities issuedBGNForeign currenciesCENTRAL GOVERNMENTDepositsBGN




211 530 303 833 262 901 257 173 245 431 266 124 254 873 241 477 245 62127 728 23 156 22 907 21 926 24 790 24 388 22 545 24 010 30 36222 728 19 156 19 907 18 926 21 790 21 388 20 545 22 010 28 362

5 000 4 000 3 000 3 000 3 000 3 000 2 000 2 000 2 000296 279 292 288 288 288 286 284 283266 279 292 288 288 288 286 284 283256 255 255 255 255 255 255 255 255

10 24 37 33 33 33 31 29 2830 - - - - - - - - - - - - - - - - -

30 - - - - - - - -1 637 348 1 688 445 1 921 575 2 001 514 2 065 414 2 082 234 2 046 202 2 051 398 2 106 270

862 483 935 471 936 717 945 717 927 033 923 697 923 697 933 476 945 476436 544 456 995 571 992 573 236 593 709 601 898 730 633 786 472 805 366338 321 295 979 412 866 482 561 544 672 556 639 391 872 331 450 355 428

1 813 000 1 901 783 2 281 049 2 065 979 2 019 028 2 315 673 1 976 287 1 867 999 2 073 855556 668 597 968 787 848 712 258 630 144 617 174 533 668 582 488 617 500483 559 494 390 659 337 630 283 551 955 504 255 418 244 455 107 506 579228 617 155 451 220 569 252 615 206 772 232 945 162 336 152 619 139 844254 942 338 939 438 768 377 668 345 183 271 310 255 908 302 488 366 735

63 330 64 648 90 278 42 342 33 588 68 975 66 480 68 560 48 10860 101 42 898 60 454 37 491 30 693 61 143 58 291 59 452 39 000

3 229 21 750 29 824 4 851 2 895 7 832 8 189 9 108 9 1089 779 38 930 38 233 39 633 44 601 43 944 48 944 58 821 62 813

0 18 394 21 994 23 394 21 994 21 994 26 994 26 994 26 9949 779 20 536 16 239 16 239 22 607 21 950 21 950 31 827 35 819

1 256 332 1 303 815 1 493 201 1 353 721 1 388 884 1 698 499 1 442 619 1 285 511 1 456 3551 024 449 1 068 720 1 094 689 1 057 898 1 088 595 1 094 257 1 111 472 968 034 1 047 795

231 883 235 095 398 512 295 823 300 289 604 242 331 147 317 477 408 560

Foreign currenciesCreditsBGNForeign currenciesLIABILITIES TO THE BNBDepositsBGNForeign currenciesCreditsBGNForeign currenciesCAPITAL AND RESERVESFunds contributed by ownersReservesFinancial resultOTHER LIABILITIESLiabilities to commercial banksDepositsBGNForeign currenciesCreditsBGNForeign currenciesDebt securities issuedBGNForeign currenciesOther unclassified liabilitiesBGNForeign currencies

Source: BNB.

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003152MONTHLY INTEREST RATES*

2002

January

February

March

April

May

June

July

August

September

October

November

December

2003

January

February

March

April

May

June

* On lev credits and deposits.** Interest rates are deflated by the consumer price index.

Source: BNB.

0.80 0.21 -1.84 -2.42

0.78 0.20 -0.84 -1.41

0.77 0.17 -0.01 -0.61

0.81 0.23 0.92 0.34

0.77 0.22 2.90 2.34

0.77 0.26 2.50 1.98

0.82 0.27 0.71 0.16

0.79 0.23 1.46 0.90

0.81 0.23 0.02 -0.56

0.70 0.25 -0.29 -0.73

0.72 0.23 0.56 0.07

0.81 0.23 -0.42 -1.00

0.71 0.24 0.06 -0.41

0.78 0.25 0.65 0.12

0.73 0.25 0.35 -0.12

0.70 0.24 0.41 -0.05

0.83 0.24 1.45 0.86

0.81 0.24 3.04 2.46

Nominal Real**

short-term credits one month deposits short-term credits one month deposits

AAAAAppppppepepepepennnnndixdixdixdixdix 153CONSOLIDATED BALANCE SHEET OF THE BANKING SYSTEM AS OF JUNE 2003

(BGN'000)

ASSETS

Vault cash and current accounts with the BNB

Claims on financial institutions

Demand deposits with banks

Time deposits with banks

Loans to banks

Other claims on banks

Loans to other financial institutions

Claims on financial institutions, total

Less: specific provisions

Claims on financial institutions, net

Claims under repurchase agreements

Trading portfolio

Investment portfolio

Investments held to maturity

Investments available for sale

Loans to nonfinancial institutions and other customers

Loans to budget

Commercial loans

Commercial real estate and construction loans

Other commercial loans

Agricultural loans

Consumer loans

Housing mortgage loans to individuals

Other loans

Loans to nonfinancial institutions and other customers, total


Loans to nonfinancial institutions and other customers, net

Memo: purchased loans

Assets for resale

Investments in unconsolidated subsidiaries and associated companies

Other assets

Hedging derivatives

Interest claims

Other assets

Other assets, total


Other assets, net

Intangible assets

Premises and other fixed assets

ASSETS, TOTAL

LIABILITIES, MINORITY INTEREST, AND CAPITAL

Deposits of financial institutions

Demand deposits of banks

Time deposits of banks

Deposits of other financial institutions

Deposits of nonfinancial institutions and other customers

Demand deposits

Time deposits

Savings deposits

Deposits, total

Borrowings under repurchase agreements

1 154 035 603 848 550 187

289 838 35 618 249 896

2 515 295 116 484 2 284 965

18 842 504 18 338

12 413 1 140 11 273

83 885 449 11 433

2 920 273 154 195 2 575 905

1 411 725 686

2 918 862 153 470 2 575 219

90 215 70 801 19 414

1 421 872 712 438 709 273

1 042 788 389 854 652 934

432 509 151 759 280 750

11 183 11 183 0

1 298 772 360 248 938 524

4 327 526 2 027 540 2 299 986

166 710 136 344 30 366

1 289 705 1 275 594 14 111

287 234 245 753 41 481

245 806 151 554 94 252

7 626 936 4 208 216 3 418 720

325 650 214 837 110 813

7 301 286 3 993 379 3 307 907

11 426 11 426 0

26 415 26 414 1

611 607 4

96 368 51 028 45 112

178 833 146 953 31 175

275 812 198 588 76 291

24 620 17 457 7 163

251 192 181 131 69 128

123 677 123 677 0

585 474 585 474 0

15 359 751 7 003 671 8 164 813

114 006 61 534 49 548

724 496 116 325 452 945

273 521 177 194 94 402

3 984 528 2 452 925 1 531 603

5 203 521 1 766 948 3 436 573

1 510 193 739 050 771 143

11 810 265 5 313 976 6 336 214

171 749 132 715 39 034

Total including

BGN foreign currency

(continued)


Short-term borrowings

From the BNB

From banks

Other

Long-term borrowings

Memo: borrowings from banks

Subordinated term debt and debt/equity (hybrid) instruments

Subordinated term debt

Debt/equity (hybrid) instruments

Other liabilities

Trading portfolio liabilities

Hedging derivatives

Interest payable

Specific provisions on off-balance sheet commitments

Other liabilities

Liabilities, total

Minority interest in consolidated subsidiaries

Equity

Common stock

Share premium on common stock

Preferred stock and related premium

Reserves

Retained profit/loss, previous years

Statutory reserves

Other reserves

Cumulative forex translation adjustment

Other equity components

Revaluation − fixed assets

Revaluation − investments available for sale

Revaluation − cash flow hedges

Profit/loss, current year

One-off effect of the change in accounting regime

Equity, total

LIABILITIES, MINORITY INTEREST, AND CAPITAL, TOTAL

Source: BNB.

28 0 28

111 383 13 515 97 868

20 530 11 825 8 705

447 403 62 539 356 950

313 667 21 994 263 759

7 745 1 000 6 745

28 851 0 28 851

7 775 0 7 677

7 151 282 6 869

49 163 23 632 25 334

60 090 6 471 53 619

530 361 320 143 181 912

13 252 494 5 886 098 7 149 806

917 628 917 628 0

3 997 3 997 0

114 887 104 714 0

232 008 232 008 0

397 518 397 456 0

192 428 191 772 0

5 138 5 173 0

218 487 218 487 0

25 166 25 166 0

2 107 257 2 096 401 0

15 359 751 7 982 499 7 149 806


Total including


AAAAAppppppepepepepennnnndixdixdixdixdix 155CONSOLIDATED INCOME STATEMENT OF THE BANKING SYSTEM AS OF JUNE 2003

(BGN'000)

INTEREST AND DIVIDEND INCOME Interest income from demand deposits with banks Interest income from time deposits with banks Interest income from loans to banks Interest income from other claims on banks Interest income from loans to other financial institutions Interest income from claims under repurchase agreements Interest income from trading portfolio Interest income from investment portfolio Bulgarian government securities Other domestic debt securities Debt securities issued by foreign governments and international financial institutions Other foreign debt securities Interest income from loans Loans to budget Commercial real estate and construction loans Other commercial loans Agricultural loans Consumer loans Housing mortgage loans to individuals Other loans Dividend income Interest and dividend income, totalINTEREST EXPENDITURE Interest expenditure on deposits of banks Interest expenditure on deposits of other financial institutions Interest expenditure on demand deposits of nonfinancial institutions and othercustomers Interest expenditure on time deposits of nonfinancial institutions and othercustomers Interest expenditure on savings deposits of nonfinancial institutions and othercustomers Interest expenditure on borrowings under repurchase agreements Interest expenditure on short-term borrowings Interest expenditure on long-term borrowings Interest expenditure on subordinated debt Interest expenditure on debt/equity (hybrid) instruments Interest expenditure on other liabilities Interest expenditure, totalINTEREST AND DIVIDEND INCOME, NETOTHER NONINTEREST INCOME Loan servicing income Fee income from off-balance sheet accounts Service charges on deposits Other fees and commissions Gain/loss on assets held for resale Gain/loss on sale of other assets Other noninterest incomeNONINTEREST EXPENDITURE Salary, social security, and pension expenditure Occupancy expenditure, net External service expenditure paid to shareholders and affiliates Other external service expenditure Other noninterest expenditureGAIN/LOSS BEFORE FOREX REVALUATION,EXTRA INCOME/EXPENDITURE AND TAX ITEMSFOREX REVALUATION GAIN/LOSSEXTRAORDINARY GAIN/LOSSTAXMINORITY INTERESTPROFIT/LOSS, NET

Source: BNB.

Total including


1 196 641 53726 966 2 449 23 518

492 4 48826 1 25

1 819 146 3311 457 1 043 414

41 458 25 787 15 67134 292 14 191 20 10121 895 13 950 7 945

570 241 329

5 344 0 5 3446 483 0 6 483

358 158 225 218 132 940499 499 0

57 708 15 766 41 942184 702 101 543 83 159

8 866 6 612 2 25482 890 81 909 98115 881 13 947 1 934

7 612 4 942 2 670218 218 0

466 082 269 698 194 025

10 508 3 090 5 8515 392 4 215 1 161

11 495 7 067 4 428

70 349 30 564 39 785

8 357 6 177 2 1801 807 1 428 379

725 315 4109 972 1 745 8 203

69 27 421 070 0 1 070

822 128 694120 566 54 756 64 203345 516 214 942 129 822

31 4238 810

39 85049 688

53-257

13 149

122 98873 447

3 70766 76763 917

262 54315 578

2 68962 323

0218 487

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003156BALANCE SHEET OF GROUP I BANKS AS OF JUNE 2003

(BGN'000)

ASSETS





Loans to banks







Trading portfolio





Loans to budget

Commercial loans



Agricultural loans

Consumer loans


Other loans





Assets for resale


Other assets

Hedging derivatives

Interest claims

Other assets

Other assets, total


Other assets, net

Intangible assets


ASSETS, TOTAL







Demand deposits

Time deposits

Savings deposits

Deposits, total


904 335 474 798 429 537

188 242 3 410 184 832

1 909 261 73 568 1 835 693

18 496 504 17 992

12 413 1 140 11 273

1 779 101 1 678

2 130 191 78 723 2 051 468

605 382 223

2 129 586 78 341 2 051 245

75 104 56 838 18 266

855 864 434 503 421 361

1 042 788 389 854 652 934

334 081 104 134 229 947

6 523 6 523 0

831 053 240 554 590 499

2 997 741 1 412 049 1 585 692

97 934 83 215 14 719

1 258 158 1 247 523 10 635

265 914 238 551 27 363

178 454 103 290 75 164

5 635 777 3 331 705 2 304 072

234 733 158 272 76 461

5 401 044 3 173 433 2 227 611

4 905 4 905 0

25 904 25 904 0

607 607 0

76 020 41 895 34 125

104 948 86 152 18 796

181 575 128 654 52 921

10 619 5 613 5 006

170 956 123 041 47 915

109 677 109 677 0

459 006 459 006 0

11 513 250 5 434 434 6 078 816

52 271 7 230 45 041

281 243 43 734 237 509

73 462 39 222 34 240

2 946 331 1 824 694 1 121 637

4 262 481 1 512 258 2 750 223

1 414 639 709 253 705 386

9 030 427 4 136 391 4 894 036

99 237 88 855 10 382

Total including


(continued)


Total including



From the BNB

From banks

Other






Other liabilities


Hedging derivatives

Interest payable


Other liabilities

Liabilities, total


Equity

Common stock



Reserves


Statutory reserves

Other reserves








Equity, total


CREDIT SUBSTITUTES AND OTHER OFF-BALANCE SHEET COMMITMENTS

Source: BNB.

28 0 28

70 561 0 70 561

292 13 279

182 604 26 299 156 305

172 743 18 394 154 349

5 719 0 5 719

11 735 0 11 735

7 676 0 7 676

7 151 282 6 869

33 255 20 417 12 838

54 238 2 555 51 683

397 139 270 973 126 166

9 900 062 4 545 785 5 354 277

570 522 570 522 0

121 552 121 552 0

170 287 170 287 0

376 407 376 407 0

174 339 174 339 0

4 149 4 149 0

178 925 178 925 0

17 007 17 007 0

1 613 188 1 613 188 0

11 513 250 6 158 973 5 354 277

1 366 923 513 968 852 955

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003158INCOME STATEMENT OF GROUP I BANKS AS OF JUNE 2003

(BGN'000)

INTEREST AND DIVIDEND INCOME

Interest income from demand deposits with banks

Interest income from time deposits with banks

Interest income from loans to banks

Interest income from other claims on banks

Interest income from loans to other financial institutions

Interest income from claims under repurchase agreements

Interest income from trading portfolio

Interest income from investment portfolio

Bulgarian government securities

Other domestic debt securities

Debt securities issued by foreign governments and international

financial institutions

Other foreign debt securities

Interest income from loans

Loans to budget



Agricultural loans

Consumer loans


Other loans

Dividend income

Interest and dividend income, total

INTEREST EXPENDITURE

Interest expenditure on deposits of banks

Interest expenditure on deposits of other financial institutions

Interest expenditure on demand deposits of nonfinancial institutions and other

customers

Interest expenditure on time deposits of nonfinancial institutions and other

customers

Interest expenditure on savings deposits of nonfinancial institutions and other

customers

Interest expenditure on borrowings under repurchase agreements

Interest expenditure on short-term borrowings

Interest expenditure on long-term borrowings

Interest expenditure on subordinated debt

Interest expenditure on debt/equity (hybrid) instruments

Interest expenditure on other liabilities

Interest expenditure, total

INTEREST AND DIVIDEND INCOME, NET

CREDIT PROVISIONS

Accrued provisions

Reintegrated provisions

Credit provisions, net

TRADING PORTFOLIO GAIN/LOSS

Gain/loss on security trading portfolio

Gain/loss on derivatives held for trading

Trading portfolio gain/loss, total

Total including


446 0 446

21 002 1 548 19 454

270 4 266

26 1 25

155 142 13

1 121 759 362

24 808 16 039 8 769

31 571 13 262 18 309

20 480 13 057 7 423

533 205 328

4 075 0 4 075

6 483 0 6 483

269 580 184 848 84 732

270 270 0

34 430 9 870 24 560

128 289 73 327 54 962

5 416 4 134 1 282

81 377 80 535 842

14 673 13 651 1 022

5 125 3 061 2 064

218 218 0

349 197 216 821 132 376

4 391 1 161 3 230

726 425 301

7 439 4 790 2 649

51 613 25 899 25 714

7 805 5 961 1 844

987 815 172

262 114 148

3 678 958 2 720

275 0 275

3 0 3

77 179 40 123 37 056

272 018 176 698 95 320

79 774

125 899

-46 125

22 306

4 498

26 804

(continued)


Total including


GAIN/LOSS ON PORTFOLIO INVESTMENTS AVAILABLE FOR SALE

Gain/loss on investments available for sale

Gain/loss on instruments effectively hedging investments available for sale

GAIN/LOSS ON INVESTMENTS HELD TO MATURITY

OTHER NONINTEREST INCOME

Loan servicing income

Fee income from off-balance sheet accounts

Service charges on deposits

Other fees and commissions

Gain/loss on assets held for resale

Gain/loss on sale of other assets

Other noninterest income

NONINTEREST EXPENDITURE

Salary, social security, and pension expenditure

Occupancy expenditure, net

External service expenditure paid to shareholders and affiliates

Other external service expenditure

Other noninterest expenditure

GAIN/LOSS BEFORE FOREX REVALUATION,

EXTRA INCOME/EXPENDITURE AND TAX ITEMS

FOREX REVALUATION GAIN/LOSS

EXTRAORDINARY GAIN/LOSS

TAX

MINORITY INTEREST

PROFIT/LOSS, NET

Source: BNB.

875

-1 170

6 128

23 477

5 211

28 653

39 837

60

-464

7 784

87 446

51 250

2 578

49 019

45 719

219 326

12 085

2 480

54 966

178 925

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003160BALANCE SHEET OF GROUP II BANKS AS OF JUNE 2003

(BGN'000)

ASSETS





Loans to banks







Trading portfolio





Loans to budget

Commercial loans



Agricultural loans

Consumer loans


Other loans





Assets for resale


Other assets

Hedging derivatives

Interest claims

Other assets

Other assets, total


Other assets, net

Intangible assets


ASSETS, TOTAL







Demand deposits

Time deposits

Savings deposits

Deposits, total


195 818 111 203 84 615

90 066 32 203 57 863

455 935 25 966 429 969

346 0 346

10 103 348 9 755

556 450 58 517 497 933

806 343 463

555 644 58 174 497 470

13 111 11 963 1 148

536 152 267 612 268 540

67 019 47 570 19 449

4 660 4 660 0

371 140 105 116 266 024

948 564 455 276 493 288

51 768 38 902 12 866

29 493 26 518 2 975

15 421 2 277 13 144

46 726 38 155 8 571

1 467 772 670 904 796 868

76 698 46 297 30 401

1 391 074 624 607 766 467

6 521 6 521 0

511 510 1

4 0 4

18 793 8 639 10 154

66 522 57 649 8 873

85 319 66 288 19 031

13 757 11 838 1 919

71 562 54 450 17 112

8 617 8 617 0

121 407 121 407 0

2 967 436 1 312 634 1 654 802

58 202 53 739 4 463

125 030 36 641 88 389

185 013 129 588 55 425

769 013 537 208 231 805

787 235 189 050 598 185

73 213 27 709 45 504

1 997 706 973 935 1 023 771

61 369 32 717 28 652

Total including


(continued)


Total including



From the BNB

From banks

Other






Other liabilities


Hedging derivatives

Interest payable


Other liabilities

Liabilities, total


Equity

Common stock



Reserves


Statutory reserves

Other reserves








Equity, total


CREDIT SUBSTITUTES AND OTHER OFF-BALANCE SHEET COMMITMENTS

Source: BNB.

40 822 13 515 27 307

20 238 11 812 8 426

236 885 36 240 200 645

113 010 3 600 109 410

2 026 1 000 1 026

17 116 0 17 116

15 012 2 812 12 200

5 852 3 916 1 936

94 865 44 470 50 395

2 491 891 1 120 417 1 371 474

347 106 347 106 0

3 997 3 997 0

-16 838 -16 838 0

61 721 61 721 0

21 049 21 049 0

17 433 17 433 0

1 024 1 024 0

31 894 31 894 0

8 159 8 159 0

475 545 475 545 0

2 967 436 1 595 962 1 371 474

467 144 248 399 218 744

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003162INCOME STATEMENT OF GROUP II BANKS AS OF JUNE 2003

(BGN'000)












Debt securities issued by foreign governments and international

financial institutions



Loans to budget



Agricultural loans

Consumer loans


Other loans

Dividend income





Interest expenditure on demand deposits of nonfinancial institutions and other

customers

Interest expenditure on time deposits of nonfinancial institutions and other

customers

Interest expenditure on savings deposits of nonfinancial institutions and other

customers

Interest expenditure on borrowings under repurchase agreements



Interest expenditure on subordinated debt

Interest expenditure on debt/equity (hybrid) instruments




CREDIT PROVISIONS

Accrued provisions









Gain/loss on instruments effectively hedging investments available for sale

Total including


727 637 90

4 366 692 3 674

222 0 222

322 4 318

336 284 52

16 096 9 299 6 797

1 622 801 821

1 191 765 426

37 36 1

394 0 394

74 680 33 441 41 239

229 229 0

21 276 5 493 15 783

46 539 23 178 23 361

2 504 1 785 719

1 418 1 292 126

977 130 847

1 737 1 334 403

98 371 45 158 53 213

2 463 1 171 1 292

4 610 3 764 846

3 066 1 983 1 083

17 031 3 740 13 291

459 207 252

679 472 207

446 184 262

6 270 787 5 483

69 27 42

795 0 795

819 128 691

36 707 12 463 24 244

61 664 32 695 28 969

27 378

26 306

1 072

14 954

2 226

17 180

3 743

(continued)


Total including














External service expenditure paid to shareholders and affiliates







TAX

MINORITY INTEREST

PROFIT/LOSS, NET

Source: BNB.

7 554

2 991

10 364

7 255

-7

207

3 998

31 642

19 674

1 129

11 432

14 859

35 141

2 685

273

6 205

31 894

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003164BALANCE SHEET OF GROUP III BANKS AS OF JUNE 2003

(BGN'000)

ASSETS





Loans to banks







Trading portfolio





Loans to budget

Commercial loans



Agricultural loans

Consumer loans


Other loans





related parties

unrelated parties

Assets for resale

Other assets

Hedging derivatives

Interest claims

Other assets

Other assets, total


Other assets, net

Intangible assets


Assets, total

LIABILITIES, RESERVES AND FINANCIAL RESULT






Demand deposits

Time deposits

Savings deposits

53 882 53 882 17 847 36 035

11 530 4 324 7 206 5 7 201

150 099 113 846 36 253 16 950 19 303

72 003 72 003 0 0 0

233 632 190 173 43 459 16 955 26 504

233 632 190 173 43 459 16 955 26 504

2 000 0 2 000 2 000 0

29 856 161 29 695 10 323 19 372

31 409 0 31 409 55 31 354

96 579 96 579 14 578 82 001

381 221 381 221 160 215 221 006

17 008 17 008 14 227 2 781

2 054 2 054 1 553 501

5 899 5 899 4 925 974

20 626 0 20 626 10 109 10 517

523 387 0 523 387 205 607 317 780

14 219 14 219 10 268 3 951

509 168 0 509 168 195 339 313 829

1 555 228 1 327 494 833

7 363 705 6 658 3 152 3 506

8 918 933 7 985 3 646 4 339

244 244 6 238

8 674 933 7 741 3 640 4 101

5 383 5 383 5 383 0

5 061 5 061 5 061 0

879 065 191 267 687 798 256 603 431 195

3 533 2 924 609 565 44

318 223 155 226 162 997 35 950 127 047

15 046 1 925 13 121 8 384 4 737

269 184 0 269 184 91 023 178 161

153 805 0 153 805 65 640 88 165

22 341 0 22 341 2 088 20 253

(continued)

TotalRelated Unrelated parties

parties total BGN foreign currency


Deposits, total



From the BNB

From banks

Other



Other liabilities


Hedging derivatives

Interest payable


Other liabilities

Liabilities, total

Reserves and financial result

Reserves


Other reserves

Revaluation reserves






Reserves and financial result, total

LIABILITIES, RESERVES, AND FINANCIAL RESULT, TOTAL

CREDIT SUBSTITUTES AND OTHER OFF-BALANCE SHEET

COMMITMENTS

Source: BNB.

782 132 160 075 622 057 203 650 418 407

11 143 0 11 143 11 143 0

27 914 27 914 0 0 0

27 914 27 914 0 0 0

99 98 1 0 1

896 197 699 403 296

38 357 28 306 10 051 4 700 5 351

860 541 216 590 643 951 219 896 424 055

10 173 10 173 0

62 62 0

656 656 0

-35 -35 0

7 668 7 668 0

18 524 10 856 7 668 0

879 065 227 446 651 619 227 564 424 055

418 512 25 616 392 896 131 075 261 821

TotalRelated Unrelated partiesparties total BGN foreign currency

BBBBBULULULULULGARIGARIGARIGARIGARIAAAAAN NN NN NN NN NAAAAATITITITITIOOOOONNNNNAL BAL BAL BAL BAL BAAAAANK NK NK NK NK RRRRReeeeepopopopoporrrrr t t t t t ••••• Ja Ja Ja Ja Jannnnnuuuuuararararary – Jy – Jy – Jy – Jy – June 2003une 2003une 2003une 2003une 2003166INCOME STATEMENT OF GROUP III BANKS AS OF JUNE 2003

(BGN'000)












Debt securities issued by foreign governments and

international financial institutions



Loans to budget



Agricultural loans

Consumer loans


Other loans

Dividend income





Interest expenditure on demand deposits by nonfinancial

institutions and other customers

Interest expenditure on time deposits by nonfinancial


Interest expenditure on savings deposits by nonfinancial


Interest expenditure on borrowings under repurchase

agreements






CREDIT PROVISIONS

Accrued provisions







TotalRelated Unrelated parties

parties total BGN foreign currency

23 18 5 4 1

1 598 999 599 209 390

1 342 1 342 0 0 0

554 0 554 449 105

1 099 0 1 099 128 971

224 224 128 96

875 875 0 875

13 898 0 13 898 6 929 6 969

2 002 2 002 403 1 599

9 874 9 874 5 038 4 836

946 946 693 253

95 95 82 13

231 231 166 65

750 0 750 547 203

18 514 2 359 16 155 7 719 8 436

3 654 1 567 2 087 758 1 329

56 16 40 26 14

990 0 990 294 696

1 705 0 1 705 925 780

93 0 93 9 84

141 0 141 141 0

17 0 17 17 0

24 24 0 0 0

6 680 1 607 5 073 2 170 2 903

11 834 752 11 082 5 549 5 533

5 032 0 5 032

8 763 302 8 461

-3 731 -302 -3 429

1 313 0 1 313

743 28 715

2 056 28 2 028

(continued)


TotalRelated Unrelated partiesparties total BGN foreign currency



Gain/loss on instruments effectively hedging investments

available for sale



















TAX

PROFIT/LOSS, NET

Source: BNB.

737 0 737

392 5 387

608 0 608

833 0 833

2 596 7 2 589

1 367 0 1 367

3 900 3 900

2 523 2 523

6 316 2 378 3 938

3 339 12 3 327

8 076 -1 296 9 372

808 11 797

-64 0 -64

1 152 1 152

7 668 -1 285 8 953


Group I

Group II

Banking system, total*

* Excluding Group III banks.

Source: BNB.

1 474 205 974 845 6 391 875 23.06 15.25 12.93

484 672 397 737 2 008 335 24.13 19.80 16.09

1 958 877 1 372 582 8 400 210 23.32 16.34 13.59

CAPITAL ADEQUACY OF THE BANKING SYSTEM AND BY BANK GROUP AS OF JUNE 2003

Bank groups Ratio %

Group I Primary liquidity

Secondary liquidity

Group II Primary liquidity

Secondary liquidity

Group III Primary liquidity

Secondary liquidity

Banking system, total Primary liquidity

Secondary liquidity

Source: BNB.

10.01

25.36

9.80

29.78

6.89

22.17

9.77

25.98

HIGH-LIQUIDITY ASSET RATIOS AS OF 30 JUNE 2003(percentage share of deposits)

Bank groups Open positions to capital base (%)

Group I

Group II

Banking system, total*

* Excluding Group III banks.

Source: BNB.

-4.62

-3.58

-4.36

OPEN FOREIGN CURRENCY POSITIONS OF COMMERCIAL BANKS AS OF 30 JUNE 2003

Capital base(BGN'000)

Total riskcomponent(BGN'000)

Total capitaladequacy

(%)

Primarycapital

adequacy(%)

Primarycapital

(BGN'000)

Degree ofasset coverage

(%)Bank groups


Group I

Liquid assets, total

ASSETS, TOTAL − inflow

ATTRACTED FUNDS, TOTAL (DEPOSITS)

Coefficient of liquid assets

Adjusted coefficient of liquid assets to deposits

Group II






Group III






BANKING SYSTEM, TOTAL






Source: BNB.

LIQUIDITY OF COMMERCIAL BANKS AS OF 30 JUNE 2003(BGN'000)

Total

2 486 240

10 865 910

9 805 695

25.36

736 480

2 775 447

2 473 398

29.78

188 392

862 990

849 805

22.17

3 411 112

14 504 347

13 128 898

25.98


Group I TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Group II TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Group III TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Banking system TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Source: BNB.

COMMERCIAL BANK CLAIMS ON FINANCIAL INSTITUTIONS AND CREDITS TO NONFINANCIAL INSTITUTIONS(BGN'000)

Bank groups Credits June 2003

7 765 968

94.41

2.56

0.60

0.56

1.87

3.14

2 024 222

92.91

1.70

1.92

1.00

2.47

3.89

757 019

92.01

7.74

0.22

0.00

0.04

1.88

10 547 209

93.95

2.77

0.83

0.60

1.85

3.19


Group I TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Group II TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Загуба (%)

Provisions (%)

Group III TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Banking system TOTAL (BGN'000)

Standard (%)

Watch (%)

Substandard (%)

Doubtfull (%)

Loss (%)

Provisions (%)

Source: BNB.

CREDIT PORTFOLIO OF COMMERCIAL BANKS (CREDITS TO NONFINANCIAL INSTITUTIONS)(BGN'000)

Bank groups Credits June 2003

5 635 777

92.30

3.53

0.83

0.77

2.57

4.32

1 467 772

90.53

2.07

2.65

1.37

3.38

5.31

523 387

88.44

11.19

0.32

0.00

0.06

2.72

7 626 936

91.70

3.77

1.15

0.83

2.55

4.40


2003

15 May

BNB Regulation No. 14 on cross-border transfers was adopted.

As of 23 May 2003 the Bulgarian National Bnak put into circulation a Cu-Nicoin with a nominal value of 5 levs, dedicated to children.

29 May

The start of the Real Time Gross Settlement System (RINGS) was approvedas of 2 June 2003.

3 July

Regulation No. 31 on government securities settlement was adopted.

Amendments to Regulation No. 5 of the Ministry of Finance and the Bulgar-ian National Bank on the terms and procedure for acquisition, redemptionand trade in government securities were adopted.

24 July

Amendments to Regulation No. 9 on the evaluation and classification of riskexposures of banks and the allocation of provisions to cover impairment losswere adopted.

Regulation No. 27 on the balance of payments statistics was adopted.

Amendments to Regulation No. 28 on trans-border transfers and paymentswere adopted.

As of 3 September 2003 the Bulgarian National Bank put into circulation asilver coin commemorating the 2006 World Football Cup in Germany, with anominal value of BGN 5.

As of 1 December 2003 the Bulgarian National Bank put into circulation acommemorative gold coin ‘The Virgin Mary’ with a nominal value of BGN 20.

Major Resolutionsof the BNB Managing Board

Documents

BULGARIAN NATIONAL BANK€¦ · SDR Special Drawing Rights TFP Transitional and Final Provisions VAT Value Added Tax WB World Bank (International Bank for Reconstruction and Development)