New Loan Guarantee Facility Opens New Opportunity for Bulgaria’s Municipalities
On September 28, 2005, USAID Deputy Assistant Administrator for Europe & Eurasia Thomas Fleetwood Mefford and HVB Bank Biochim Chief Executive Officer Peter Harold signed a $15 million loan portfolio guarantee agreement for municipal infrastructure projects. The agreement guarantees municipal loans with the Bulgarian bank under USAID’s Public Credits Guarantee Program.
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| The $15 million loan guarantee agreement signed by USAID’s Mefford (left) and and HVB Bank Biochim’s Harold (right) is expected to boost infrastructure development |
The signing of the ceremony took place in Svishtov, Bulgaria. The city was chosen as the ceremony site due to its long-term involvement with USAID in the area of municipal infrastructure finance.
“This is the first agreement of this kind guaranteed by USAID totally directed to the Bulgarian municipalities. Our purpose is to help the development of Bulgarian municipalities by facilitating their access to credit for key infrastructure projects,” said Mefford.
The municipal credit market in Bulgaria is gradually evolving to a point where a significant amount of long-term borrowing could occur. This municipal credit guarantee facility will enable approximately 20-25 municipalities to access financing for critically needed infrastructure upgrades. Municipalities can also use the money to leverage municipal co-financing for European Union-funded investment projects and to address the damage caused by recent flooding. Potential projects could include street repair, urban and rural neighborhood improvements, water and sewage systems, green areas development, street lighting, construction and/or renovation of buildings or other municipal infrastructure.
The guarantee backed by the US Government, the largest donor in strengthening local governments in Bulgaria, will add greater confidence to credit financing and will help alleviate some of the traditional conservatism of many municipalities. USAID/Bulgaria’s partner bank is HVB Bank Biochim – the fourth largest bank in Bulgaria.
Together with the newly founded specialized institutions and Euro-funds Directorate of HVB Bank Biochim and Hebrosbank, USAID will also grant technical support to the Bulgarian municipalities in the development of projects needing external funding. Since the early 1990s USAID has funded various projects and initiatives to establish a more efficient and responsible local governance in Bulgaria through financial decentralization. To date, the Agency has extended over USD $40 million for local government reform.
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