News and Analysis

The Fund of Funds is to Invest over BGN 1 billion in the Bulgarian Economy through Financial Engineering

16.01.2017

‘The Fund of Funds can make the necessary resources available to industrialists and employers. We hope to see project applications with high promise to contribute to the achievement of Bulgaria’s macroeconomic goals, to a better working environment and a more modern and cleaner economy’, Mr. Valeri Belchev, the Executive Director of Fund Manager of Financial Instruments in Bulgaria’ EAD (FMFIB EAD) told the conference on The Juncker Plan: Capabilities and Results. The event had the subtitle ‘The Fund of Funds: a New Approach to Managing ESIF Financing’, and was organised by the Confederation of Employers and Industrialists in Bulgaria, KRIB. Mr. Valeri Belchev stressed that FMFIB EAD had put together a team of professionals with impressive background in implementing financing instruments for large financial companies and institutions. In his presentation, he talked about the progress made by the Fund of Funds in organising its operations. Mr. Valeri Belchev highlighted the key stages in the activities of the FMFIB so far and explained the short-term plans for 2017 for the various financing instruments.

Tomislav Donchev, Deputy Prime Minister for European Funds and Economic Policy, the Finance Minister Vladislav Goranov, the Minister of Regional Development and Public Works Liliana Pavlova, the Minister of Environment and Water Resources Ivelina Vassileva, the Minister of Labour and Social Policy Zornitsa Roussinova, the Deputy Managing Director of the European Fund for Strategic Investments Iliana Tsanova, representatives of the European Commission and the European Investment Bank (EIB) took part in the event.

The European funds will operate also after 2020 but will look very different from now, said Deputy Prime Minister for European Funds and Economic Policy Tomislav Donchev. The Number One task for Bulgaria is to learn how to utilise the EU resources available via financial engineering. He estimated that while those resources currently account for about 10 per cent of the whole financial framework, after 2020 financing allocated to financial engineering instruments will account for at least one quarter.

‘As early as at the end 2014, the Ministry of the Finance began internal discussions on how to manage the ample resources earmarked for financing instruments within the operational programmes. Personally, I was convinced that sooner or later we will have to build the relevant capacity, both within the administration and among the users of those resources’, said Vladislav Goranov, the retired Minister of Finance, adding that the Fund of Funds is a great challenge as an undertaking. It has over one billion Bulgarian levs available which should be invested via a number of financing instruments in order to reach businesses. To retain the competitiveness of the economy, there needs to be more discussion of financing instruments and less and less talk about grants, he said.

Micro-financing for small start-ups and support for social entrepreneurship are the two key areas that can bring about a rise in employment. That is why BGN 107 million from the OPHRD 2014-2020 commitment have been allocated to the Fund of Funds, said the Minister of Labour and Social Policy Zornitsa Roussinova.

In Operational Programme Regions in Growth 2014-2020, investments via financing instruments have been expanded. They are available for 39 large and medium-sized Bulgarian towns. Seed capital was increased to BGN 370 million, allocated to three Urban Development Funds: one for Sofia, and one each for Northern and Southern Bulgaria, said the Minister of Regional Development and Public Works Liliana Pavlova. A Financing Agreement between FMFIB EAD and the Ministry concerning the management of resources allocated to financing instruments under the Operational Programme was signed in November.

The Ministry of Environment and Water Resources is expected to sign a Financing Agreement with FMFIB EAD, making available 10 per cent of the resources under the Water Resources Axis of the OPE 2014-2020, once the new financing mechanism for the water and sewerage sector is launched, said the Minister of Environment and Water Resources Ivelina Vassileva. She recalled that the first agreement between the Ministry of Environment and Water Resources and the FMFIB concerning the provision of BGN 52.4 million intended for bank guarantees for projects in the waste management sector is now a fact. The FMFIB will provide resources totalling almost BGN 240 million to final recipients under the Water Resources Axis in guarantees and investment loans to the water and sewerage networks and facilities.