Bulgaria: No Need for IMF Bailout Talks, Tax Hikes

Bulgaria: No Need for IMF Bailout Talks, Tax Hikes
2010-10-19 09:58:50

Bulgaria's finance minister has assured that the country will have no need to raise taxes or hold talks with the International Monetary Fund over a bailout loan for its ailing economy to bottom out of the crisis.

"Bulgaria will manage to crawl out of the crisis without a loan or an increase in taxes," Minister Simeon Djankov said at a European round table with the industrialists, which took place in Sofia.

GERB, which swept the general elections last summer, first said they would immediately sign a stand-by agreement with the IMF to serve as a guarantee for the country's financial stability if they come to office.

Its tenure however has been marked by a series of u-turns on important issues, including IMF bailout loan.

While some of its neighbors are completely dependent on EU and IMF loans, such as Greece with its large bailout, Bulgaria's government has said the assessment of the options has shown aid is unnecessary.

According to it the country is better prepared to weather the global crisis in comparison to other European countries thanks to its prudent fiscal policy.

At the beginning of October the International Monetary Fund wrapped up its two-week review and projected Bulgaria's economy to grow from 0% to 0.4% in 2010 and 2% in 2011.

It said this year's inflation will be moderate, while the current account deficit is expected to fall below 3% of gross domestic product.

Bulgaria currently operates in currency board regime and the lev is pegged to the euro.

Bulgaria is among the top ten countries in the world with the lowest effective rates and is preceded only by Hong Kong, tax havens like the Bahamas Islands and petro-states like Saudi Arabia, showed earlier this month an analysis by KPMG consultancy.

Effective rates are derived by taking total income tax and/or social security over gross income prior to deductions.

As of 1 January 2008, Bulgaria introduced a 10%  flat tax applicable for all income levels.

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