Bulgaria Restores Rail Subsidy

"The subsidy to BDZ Passenger Services will be fully restored. There will be no layoffs and no termination of train services," Bulgarian Transport Minister Ivaylo Moskovski told reporters on Monday night after a meeting between the Finance Ministry, the Transport Ministry, and BDZ management.

Djankov had withheld the BGN 14 million [€7 million] subsidy payment after BDZ failed to service two 1995 World Bank loans whose interest has had to be assumed by the Finance Ministry.

Following the Monday meeting, Moskovski elaborated on the package of measures and reforms that the three institutions had agreed upon in order to prop up the state railway, which has debts totaling almost BGN 1 billion.

"We have agreed to implement as soon as possible all short term measures to reduce BDZ's expenditures in any way possible," he said.

The first measure to go into effect will be a major legislative amendment to allow Transport Police and BDZ conductors to fine riders who do not have proper tickets.

"Keep in mind that the railways can make millions by cutting out the free trips," Moskovski said.

The second measure involves introducing harsher punishments for theft of fuel or spare parts from the railway inventory – a rampant form of crime in Bulgaria.

"Third, we agreed with the Finance Ministry that BDZ will make non-cash contributions – buildings or perhaps holiday properties – that can be used to guarantee its payments to the creditor, the World Bank, on this old loan," Moskovski explained, noting that the loan dates back to the time of [the Socialist Cabinet of] Zhan Videnov.

He said government experts will determine over the next couple of days which BDZ assets can be used to guarantee the servicing of the company's loan to the World Bank.

He added that the Bulgarian railway company will have to do away quickly with any unrelated activity by selling its shares in any other companies.

"The state subsidy for July will be paid in full by the end of the year, as it is stipulated by the law. We will work out the details in the next couple of days. There is no reason not to allocate the money," he said.

"The reforms in question are not anything new for us. We have been working on them for a while anyway. The matter now is that we hope to see results in the near future," BDZ chief Yordan Nedev said.

Moskovski also revealed that he has been assured by the Bulgarian Privatization Agency that by the end of the year BDZ Freight Services – the one profitable arm of the state-owned company – will be sold.

Last week, Bulgarian Prime Minister Boyko Borisov suggested that German company Siemens and German bank KfW could take over BDZ Freight Services in exchange for forgiving BDZ's debt to the two companies.