- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
submited on 18.10.2010 in category Political stability | Monetary policy | Macroeconomic developments
Interest rates on the interbank market in Bulgaria have been recently a subject of discussion. It is therefore useful to determine 1) whether interest rates in Bulgaria are indeed higher compared to other European countries and 2) is there a difference between interest rates on short-term and long-term loans.
In the short-term segment interest rates in Bulgaria are higher than the EU average, but at the same time lower than the interest levels in Poland and Romania. The difference between the interest rates in Bulgaria and abroad is, however, not that significant. The current level of interest rates on the money market in the country shows that the local banking system does not have liquidity issues. Interest rates on the overnight deposits are at record low levels since the introduction of the currency board.
In the long-term segment, however, interest rates in Bulgaria are among the highest in the EU, reflecting the ongoing process of substitution of the external sources of financing, which are mainly the parent-banks, with domestic sources, primarily Bulgarian households. The process of asset quality deterioration, driven by the increase of delinquency rates, will keep the interest rates at relatively high levels in the next months, with the trend toward slight decline.