Bulgaria's long-standing ambition to join the eurozone is more relevant and urgent than ever before against the backdrop of the unstable international environment, as the adoption of the euro will have five groups of consequences for our country. This is known from a statement by the Governor of the Bulgarian National Bank Dimitar Radev, quoted in a publication by OMFIF-State Street Global Advisors, the central bank reported.
"The adoption of the euro will have five groups of consequences. It will anchor Bulgaria's monetary policy within the framework of the European Central Bank (ECB) and will ensure reliability, stability and predictability. In addition, the adoption of the euro will reduce currency risk and protect the economy from speculative pressure; will increase investor confidence and deepen financial integration; and will offer access to eurozone mechanisms, such as the European Stability Mechanism," Radev said.
According to him, in a world where policy instability is structural, eurozone membership will strengthen Bulgaria's strategic resilience through institutional consolidation and reliable crisis response tools, BTA writes.
"Now the composition of Bulgaria's foreign exchange reserves is determined by our legally defined mandate and the operational logic of the currency board. Generally speaking, about 90 percent of our reserves are held in euros and about 10 percent in gold," the BNB governor specified.
"Credit and foreign exchange risks are highly limited. Eligible assets must have a minimum rating of AA minus. This highly conservative, short-term approach served us well during periods of temporary market tensions," Radev said.
In the long term, joining the eurozone will mark a new stage in reserve management. The new Bulgarian National Bank Act introduces greater flexibility, he added. "Once the euro becomes our national currency, we will start diversifying our foreign exchange reserves into other currencies," the BNB governor said, adding that the foundations for this are already being laid by developing a new operational infrastructure, expanding the network of counterparties and creating deeper market expertise.
"In this way, we will adapt our risk framework by easing the credit threshold for the assets we hold from AA minus to A minus and broadening the investment horizon from short-term to strategic, long-term. These reforms will expand our investment options, possibly including new instruments such as exchange-traded funds. Naturally, all such instruments will be subject to very careful assessment to ensure compliance with our main objectives: capital preservation and liquidity provision," explains Dimitar Radev.
He said that as global fragmentation becomes a defining feature of the international environment, central banks must adapt. "We must continue to uphold the core principles of reserve management - liquidity, security and return - while paying increasing attention to geopolitical and systemic risks," he said.
"Strategic positioning will be as important as financial fundamentals." For the Bulgarian National Bank, this means maintaining the stability achieved under the currency board, with readiness to implement a more dynamic, long-term and risk-aware reserve management strategy in the near future in the conditions of the euro area," Radev points out.