Bulgaria's government will be granting the troubled state-owned railway company BDZ a low-interest loan of BGN 140 M.

The loan arrangement is included in a draft law designed to prop up the railway holding adopted by the Bulgarian Cabinet, Transport Minister Alexander Tsvetkov announced.

The credit will be provided through the Bulgarian Development Bank; it will have an interest rate of 5.15%, as stipulated by the permission that the government got from the European Commission to provide state aid to the railways. The EC has allowed the government to provide aid to BDZ totaling BGN 248 M.

BDZ needs the new loan in order to start paying off its overdue debts, and to start absorbing a large modernization loan from the World Bank.

BDZ has overdue debts amounting to BGN 500 M; together with current debts, it owes about BGN 1 B.

BDZ gets a state subsidy of BGN 180 M annually under its contract with the government for providing a public service. In addition, it also receives a government subsidy for modernization amounting to BGN 20 M annually.

In December 2010, Bulgaria made a preliminary agreement for a loan from the World Bank for BDZ's restructuring of up to BGN 600 M. Recent reports say the WB loan will most likely amount to BGN 460 M.

The first tranche from the World Bank, however, will arrive in the summer of 2011 at the earliest. What is more, in order to get the loan, BDZ will have to meet WB's harsh conditions, which are expected to lead to the laying off of some 3000-4000 railway workers.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!