(C) The meaning of fixed currency rate for the capital market in Bulgaria

The stability of the Bulgarian lev driven by the nominally fixed rate to the Euro is a solid ground for direct and portfolio investments in public and private companies in the country. When analyzing the macro-data, the current account deficit and the external debt in particular, the pros and cons of the fixed-rate are pretty much debatable. From the point of view of the capital market, however, the fixed rate means one and only one thing to the foreign investors – minimum foreign currency risk.

The admission of Bulgaria in the Eurozone is a small step, but one that will take the business and the government along a long and thorny road. The benefits for the capital markets would be more sensible in the scope of stable government and central bank policy through fulfilled political engagements, which thence would be reflected in the market via a premium or / and lower discount rate.

Practically, the only difference should be focused on the change of the degree of trust of the foreign investors, not any expectations of shifts in the fixed nominal rate.