Bulgaria : from enterprise indiscipline to financial crisis

Preprint
Publisher Website
Google Scholar
    • preprint
      • Published in RePEc
Abstract
The first part of the paper highlights the many and often perverse forms taken by the adjustment of State Owned Enterprises in Bulgaria since 1992. The differentiation into four clusters of unevenly performing State firms shows inter alia two important aspects in this process. First, a large number of heavily loss-making public enterprises has been allowed to survive since the beginning of transition at the expense of the rest of the economy, first of all the banks whose insolvency they contributed to while absorbing a large part of newly extended credits. However, as a rule, losses have been much financed more through informal or non-contractual means, mostly by the accumulation of interest and tax arrears, while in principle the impossibility of obtaining new external finance, or issuing equity after having lost all base capital should have made bankruptcy the only remaining solution. The second decisive aspect in the adjustment process is that more competitive, often profitable enterprises have also been accumulating large arrears towards other agents, with the banks again being the main victim. The implication is that arrears have been much larger than the mere financing of losses would have required, and have apparently been considered by a substantial number of enterprises as a current revenue flow rather than as a financing source. Indeed, SOEs as a whole have imposed informal revenue transfers to other agents averaging (on a conservative estimate), 28% of their own value added per year between 1992 and 1995. The second part of the article analyses how the accumulation of enterprise arrears and of budget deficits, since 1992, has been absorbed without major financial disruptions. The evolution of the aggregate accounts for enterprises, government, households and the commercial banking sectors are then presented, so as to highlight three decisive factors in this exercise in crisis deferment. First, households have suffered large inflation taxes on their deposi
All Related Versions

This publication has 0 references indexed in Scilit: