Discussion on the proposed amendments to the Silver Fund Act

“Clarifying in which cases the assets of the Silver (Pension) Fund will be considered part of the fiscal reserve, and in which cases they won’t, is of key importance”, said Todor Tabakov, Member of the Board of Directors of the Silver Fund and member of the Executive Council of the BCCI. He was one of the participants in a round table discussion dedicated to the proposed amendments to the Silver Fund Act, organized by the Bulgarian Industrial Capital Association (BICA). In reply to a statement made by Mr. Georgi Angelov, Chief Economist at Open Society Institute that if the resources in the Silver Fund are used to purchase government securities, the fiscal reserve would be reduced by their value, Mr. Tabakov said that it should be carefully considered, in view of the inability to use the resources of the Fund for targeted transfers to the social insurance budget until 2018, whether in fact the purchased government securities would not be considered an asset as Mr. Angelov claims. According to Mr. Tabakov, Eurostat’s rules on financial assets specify that regardless of their kind, the resources shall be considered an asset until they can be used to make targeted transfers to the social insurance budget. This is a very important question, because if the resources are excluded from the budget, this would directly affect the country’s credit rating, Mr. Tabakov pointed out. 

He refuted Mr. Nikolay Vasilev and Mrs. Lidiya Shuleva’s allegations that at the moment the return is satisfactory – in the last two months of 2011 return on term deposits was practically zero, and that is precisely why the money is currently kept in Bulgarian National Bank (BNB) current account, in order to generate some income, even though very insufficient. The member of BCCI’s Executive Council stressed that a law should not be passed on the presumption that the Fund is poorly managed.

It is better to discuss whether the proposed legal framework is good, Mr. Tabakov added. If decided to manage the Fund as an investment bank, a highly professional unit must be created, he said stressing the need to provide the Board of the Fund with the opportunity to take decisions from a distance as well. 

Boryana Pencheva, Deputy Minister of Finance said that the government’s arguments in favour of allowing the resources of the Silver Fund to be invested in government securities and shares of Bulgarian companies featured at the stock exchange, is to achieve higher return with minimum risk. According to Deputy Minister Pencheva, despite the positive nominal return, each year there are losses because of the inflationary devaluation of money in the Fund. In recent years, devaluation was between 1.1 and 5.3 % or about BGN 42 million on average lost annually due to devaluation, Pencheva said.

The former Deputy Prime Minister Lydia Shuleva said that in order for the Silver Fund to fulfill its function, it must have resources between BGN 7 and 10 billion and until this sum is gathered it would be absurd for the Fund to guarantee the stability of the pension system. “Assuming that the Fund was created, it would play a much bigger part by staying part of the fiscal reserve and maintaining stability in the country, rather than by being used for investment exercises”, she said.
 

The amendments will be discussed at a meeting of the National Council for Tripartite Cooperation before they are adopted by the Government.

22.03.2012