Georgi Stoychev,
Radio Free Europe
- Mr Hanke, the IMF expressed fear that the economic measures of the new Bulgarian government and particularly the intentions on tax reduction may lead to budget deficit growth. Do you share these apprehensions?
- No, because the IMF is against whatever tax reduction, whenever and wherever it may be, and moreover the fund is always wrong about this matter. My opinion as well as that of the markets is, that the proposed tax reform is a step in the right direction, since it will stimulate the economy, remove the impediments in the face of economic activity and the biggest part of the grey economy will emerge in the daylight. The models of IMF for the tax cuts are always wrong and usually the kind of reduction as that proposed in Bulgaria, brings along to collecting of more taxes, rather than less. Thus, I don't see any problem in Bulgaria's drive to simplify and reduce taxes. I have insisted on the same thing for 5 years now.
- How will you comment the fears about possible rise in the tax deficit? To what extend the Bulgarian currency board could be threatened, if the deficit would grow much?
- Even if you look the things statically, it seems that the financing will be in good shape, unless the government doesn't start to spend a lot of money. The Cabinet plans to reform the customs offices, to downsize the administration by 10%, to rise the electricity prices by 10 percent in October, which will make them more realistic. These steps help the budget. Thereby measures are already taken to cover the necessary financing on decreasing the tax revenues. You must look at the taxes in a dynamic way.
- The government intends to issue Euro bonds either till end-year, or in early-2002. Having in mind the crisis in Argentina and in Turkey, do you consider the market situation as suitable one?
- As a whole terms are not good, but the Bulgarian bonds are performing very well in the last month - month and a half. So, even though the common situation is not good, the concrete situation in Bulgaria is relatively good one. The currency board imposed a budget discipline in the country and the market understands and likes that.
- Would you give some advice to the government about the economic policy?
- The danger is because of the attempt of the government to do so many things, but eventually it may turn it hasn't done anything. In Bulgaria the key to the reforms is to focus upon several things of a crucial importance and to warrant that they will be realized.
WHO’S WHO
Steve H. Hanke
Professor, Department of Geography and Environmental Engineering
(Joint Appointment, Department of Economics)
Director, Institute of Applied Economics and the Study of Business Enterprise.
B.S. (1960) Business Administration from the University of Colorado at Boulder.
Ph.D. (1969) Economics from the University of Colorado at Boulder.
Prior to joining the Hopkins faculty in 1969, Hanke was on the faculty at the Colorado School of Mines in Golden. In the 1970s, he was a faculty member at the University of California at Berkeley and a research scholar at the International Institute for Applied Systems Analysis at Schloss Laxenberg, Austria. In the early 1980s, Hanke served as a Senior Economist on President Reagan’s Council of Economic Advisors. And during the 1990s, he has held various posts with foreign governments: Personal Economic Adviser to Zivko Pregl, Vice President of Yugoslavia, State Counselor on Monetary and Financial Issues, Republic of Lithuania, Advisor to the Minister of Economy, Domingo Cavallo, Republic of Argentina, Advisor to the President of Bulgaria, Petar Stoyanov and Special Counselor to the Economic and Monetary Resilience Council, Republic of Indonesia.
Since 1993, Hanke has been a columnist for Forbes magazine. He is a Member of the Steering Committee of The G-7 Council in Washington, D.C. and a Fellow at The World Economic Forum in Geneva. In June 1998, Hanke was named as one of World Trade magazine’s twenty-five most influential people.
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