The Bulgarian Government and the International Monetary Fund reached an agreement on the budget for 2002. They agreed on a 0.8% budget deficit and zero tax for bank transfers to offshore zones. Finance Minister Milen Velchev announced the agreement on October 26. There will be a Value Added Tax for tourist services but the effective rate will be 10% and not 20% since 50% will be recognized as tax credit. The macroeconomic framework is not to be chamged a lot. The biggest change is that the growth of the GDP will be 0.5% less than the envisaged one and is set to 4%. Finance Minister Velchev said that he expects most revenues from export. According to Velchev, the Fund gave up more of its positions than the Bulgarian Government did - with exception of the zero profit tax rate for reinvested profit. The corporate income tax becomes 15% for all companies. The envisaged changes in the tax legislation and the draft budget for 2002 will be discussed by the Government on October 29. Jerald Schiff, Head of the IMF mission to Bulgaria commented that the negative consequences for the country after the US event on September 11 will be more than the positive ones. According to Schiff, the budget can be realized, though it won’t be an easy task. He added, that main priority will be the energy and transport policies. The IMF mission will visit Bulgaria in November to discuss the structural reforms to be undertaken by the Cabinet. Most probably, the entire governmental program will be discussed.

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