Municipalities to receive up to BGN 4 mln in credits under EU projects

The State will provide financial support to municipalities for the implementation of projects using EU funds with credits amounting to up to BGN 4 mln. The interest on loans from the Fund for Local Authorities and Government (FLAG) is formed of three components – current interest value of the 6-month EURIBOR at the time of the loan application, FLAG bonus, amounting to 1.715%, and the risk allowance, which is in the range of between 0.5% and 3%.
Local authorities will be backed to cover the interest accrued in 2011 and the fees for debt servicing to FLAG. The funds will be provided as targeted transfers, states the government ruling, which stipulates the conditions, criteria and procedures for financial assistance to municipalities and for their access to financing from the FLAG JSC.

It is envisaged that municipalities will be classified into several groups, entitled to varying degrees of support, according to the integral assessment of their credit potential. The methodology, proposed by the National Association of Municipalities in Bulgaria which was introduced in 2010, remains in force.

When part of the funds for financial assistance to municipalities for 2011 is saved, municipalities will be entitled to reimburse costs incurred by them in 2009 for the payment of interest and fees for servicing their debts to the fund.

The FLAG Fund was established in March 2007. Its lending activity to municipalities started in 2009. The Fund has approved a total of 148 loans, amounting to over BGN 147 mln. UniCredit Bulbank Bank has managed the Fund so far.

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