Official reserve assets of the Bulgarian National Bank (BNB) increased by 0.5% m/m to EUR 21.7bn at end-May, the BNB reported. Reserve assets accounted for 47.4% of the projected 2016 GDP and also provided a solid 10.x-month coverage of imports. Reserves also provided a 2.8x coverage of short-term gross external debt, which is the highest coverage since mid-2005. The indicators for the sufficiency of forex reserves have been consistently improving since 2014 on account of the stronger current account position.
On the liability side of BNB’s issue department balance sheet, the increase was due to higher government deposits and an increase in deposits by other depositors. We think that the increase in the government deposit might be due to the repayment of the state liquidity aid by FiBank. The increase in other deposits likely reflected relations with the deposit guarantee fund, in our opinion. Bank deposits and currency in circulation declined m/m at end-May.
Pre-determined reserve drains for the next twelve months amounted to EUR 489.8mn at end-May. They were little changed from the previous month, in our opinion signalling no short-term financial inflows in May. Conditional reserve drains stood at EUR 66.4mn and also remained stable during the month.