Opinion of EKIP against the amendments to the BNB law

To

The Chairman of the Budget and Finance Committee of the National Assembly

The Minister of Finance of the Republic of Bulgaria

The Governor of the Bulgarian National Bank

POSITION

By Stoyan Panchev

In his capacity as Chairman of the Expert Club for Economics and Politics - EKIP

DEAR MADAM PRESIDENT,

DEAR MINISTER,

DEAR MR. MANAGER,

In connection with a submitted bill to supplement and amend and supplement the Currency Act No. 902-01-64 of 02.12.2019 and in particular a proposal submitted by Menda Stoyanova and a group of MPs with No. 054-04-20 of 23.01.2020

In this opinion, we express our disagreement with the texts of the proposal. The above-cited draft law introduces an amendment to the Bulgarian National Bank Act in Art. 29, to which is added para. 3, which reads:

"As of the date of Bulgaria's participation in the Exchange Rate Mechanism II, the official exchange rate of the lev to the euro shall be equal to the central rate between the euro and the lev, agreed in accordance with paragraph 2.3 of the Resolution of the European Council establishing an exchange rate mechanism in stage three of Economic and Monetary Union Amsterdam, 16 June 1997 and Articles 1.1 and 17.1 of the Agreement of 16 March 2006 between the European Central Bank and the central banks of the Member States outside the euro area laying down the procedures for the operation of the exchange rate mechanism in stage three of Economic and Monetary Union."

Such an amendment to the Bulgarian National Bank Act creates an unacceptable risk to the currency stability of the Republic of Bulgaria, putting its fixed exchange rate against the euro into question within the framework of the negotiations that are expected to begin between the Bulgarian government and the European Central Bank, following the official admission of the Republic of Bulgaria to the ERM-II exchange rate mechanism.

In order to eliminate this risk and guarantee the country's currency stability, we believe it is imperative to add text to the same law that sets the following categorical condition:

The Bulgarian Government, the Ministry of Finance and the Bulgarian National Bank have a mandate to negotiate with the European Union institutions regarding Bulgaria's accession to ERM-II and the euro area, only and only if the fixed exchange rate of 1.95583 leva per 1 euro remains unchanged under:

1. Bulgaria's possible accession to the ERM-II exchange rate mechanism
2. Throughout Bulgaria's stay in the ERM-II exchange rate mechanism
3. In the event of a possible replacement of the Bulgarian lev with the euro as the national currency

We believe that government and parliamentary declarations, as well as any legal amendments beyond the above, would be insufficient to guarantee Bulgaria's currency stability.

In the absence of a fixed exchange rate for the lev, we believe that any negotiations on Bulgaria's possible accession to the eurozone should be suspended. This is the only way to definitively guarantee the country's currency stability and to allay public concerns about a possible devaluation of the Bulgarian lev.

30.01.2020

Sofia, Bulgaria

Stoyan Panchev

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