Steve H. Hanke is a Professor of Applied Economics at the Johns Hopkins University in Baltimore, a Senior Fellow at the Cato Institute and a columnist for Forbes Magazine. He served as an advisor to President Petar Stoyanov and was named one of the twenty-five most influential people in the world in 1998.
Steve Hanke answered questions of Milena Hristova, Editor-in-Chief of novinite.com and The News
Q: What did Bulgaria gain by joining the military coalition in Iraq? What did it lose?
A: On the surface and in the short term, Bulgaria's gain will be US military bases which are scheduled to be placed in Bulgaria. The loss will be a more cautious attitude of some European countries towards Bulgaria. Without knowing Bulgaria's long-term strategic goals, one cannot make a deeper and more long-term analysis of the probable benefits and costs, however.
Q: What are Bulgaria's chances to get back Iraq's debt?
A: An insight into what claimants might receive from Iraq is found in the proposed UN resolution on those matters. The proposal is to reduce the reparations owed to Kuwait by 80%. It also includes the following language that will give Iraq a strong hand in Paris and London Club debt negotiations: All revenues from the sale of Iraqi oil "shall be immune from judicial, administrative, arbitration or any other proceedings." Accordingly, creditors can at best hope to obtain 20%, or less, of what
they are owed.
Q: How would you comment the warning of the World Bank that the government may not get its hands on a USD 150 M tranche under the PAL-2 facility if Bulgartabac does not go under the hammer in 2003?
A: The World Bank has finally gotten tough with the games Bulgaria has played during its privatisation process. Hopefully, this will force Bulgaria to clean up its act.
Q: How do you assess the work of the economic team of the government? What was its gravest mistake and biggest success?
A: The biggest mistake made by the economic team was its failure to follow through on the recommendations I made in my keynote address delivered at the Investment Forum on June 3, 2002. That failure has resulted in privatisation blunders and continued problems with corruption. The biggest success is the retention of the currency board system. Even though that system is not as orthodox as I would prefer, it has resulted in economic stability, as reflected in the superior performance of Bulgarian sovereign debt.
Q: Bulgaria recently scrapped two key major deals - for Bulgartabac and the telecoms operator BTC. What will be the effect on the country's investment image?
A: The twin evils of corruption and privatisation blunders have damaged Bulgaria's image and will make it more difficult to attract much-need foreign direct investment.
Q: Which do you consider the biggest problem in Bulgaria's privatization?
A: Privatisation in Bulgaria has been plagued by irregularities and corruption.
Q: Will Bulgaria be a richer country in ten years?
A: Absent a great calamity, Bulgaria will probably be richer in 10 years. Whether its relative standing improves is a more difficult question to answer. If Bulgaria implements the reforms I suggested in June 2002, I have little doubt that Bulgaria will be richer in 10 years and that its relative standing will improve, too.
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