News and Analysis

The Fund of Funds (FMFIB EAD) Signed a BGN 370-Million Agreement

11.11.2016

On 11 November 2016, the Ministry of Regional Development and Public Works and Fund Manager of Financing instruments in Bulgaria EAD signed a Financing Agreement concerning the management of resources allocated to financing instruments under Operational Programme Regions in Growth 2014-2020. In the presence of Minister of Regional Development and Public Works Liliana Pavlova and her deputy and head of the Managing Authority of the operational programme, Ms. Denitsa Nikolova, the document was signed by Ms. Greta Dimitrova, Deputy Director General of DG Urban and Regional Development, Mr. Valeri Belchev, the Executive Director of Fund Manager of Financial Instruments in Bulgaria EAD , and Mr. Ilia Karanikolov, Vice Chairman of the Managing Board and Executive Director of Fund Manager of Financial Instruments in Bulgaria EAD (FMFIB EAD).

The financing agreement enables the application of an approach to managing and investing public resources by means of financing instruments which is a first-ever and innovative approach for Bulgaria.

Resource allocation for financing instruments under OPRG 2014-2020 amounts to almost BGN 370 million and will be used to provide support for investment projects in the area of sustainable and integrated urban development in the 39 largest Bulgarian towns, in energy efficiency, and development of regional tourism across the country.

Final recipients of the resources could include municipalities, public institutions, private and municipal enterprises, public/private companies operating in the area of urban development or running projects in regional tourism. The financing instrument implies that the final recipients should be encouraged to apply an entrepreneurial approach to designing and implementing viable investments, thus contributing significantly to the sustainable social and economic development of the regions.

The Executive Director of FMFIB EAD, Mr. Valeri Belchev, said, ‘In the process of structuring financing from the EU and in the context of a growing shortfall in public resources, financing instruments will play an increasing role by involving the banking sector and private investors in the implementation of public policies. That is why I would like to point out that the 370 million levs and the private capital mobilised by means of financial engineering will serve as a driver in public works developments in our towns and regions’. He went on to say that, unlike in the previous programming period, it will now be possible to combine the financing instruments with grant support. That will open the doors for a number of projects which bring large benefits to the public but would be hard put to generate a rate of return that would be acceptable to investors, were it not for the grant financing.

At the signing ceremony, Minister Liliana Pavlova said, ‘By launching the fund, we expect to raise additional resources of at least half a billion levs from the financial sector for investments’. Minister Pavlova recalled that the management of such financing instruments was piloted in the previous programming period under the JESSICA initiative with EUR 33 million in two funds, which resulted in investments of over BGN 180 million. She went on to say that an important requirement for each project applying for financing from the Programme is to generate new jobs, creating employment, and attract private capital by offering the opportunity for investment returns that can be reinvested in new similar projects. The Minister gave the example of projects for agricultural wholesale and farmers markets, cinemas, health centres, urban attractions, etc.

She added that in compliance with the programming requirements, for the period until 2020, each Operational Programme has allocated resources for that type of financing instruments, which will secure about BGN 3 billion for investments via the Fund of Funds, on the basis of financial engineering structures. The funds are the future of European financing and will be a key tool in the post-2020 planning period as well, the Regional Development Minister said. She expressed her hopes that the Fund Manager of Financial Instruments in Bulgaria would announce the calls as soon as possible, and the Managing Financial Intermediaries will be selected successfully, one each for Sofia, Northern and Southern Bulgaria.

Deputy-Minister Denitsa Nikolova also stressed on the benefits from the financing instrument which opens up an additional opportunity for private capital to invest in projects of public importance that contribute to society. ‘We provide an opportunity for investing considerable resources in the most efficient way in projects aimed at improving the energy efficiency of buildings, the appearance of the building stock, improvements to the urban environment, parklands, and opening up opportunities for project financing in smart urban transport systems, etc.’