Lack of operating capital blocks projects under OP Environment

The lack of operating capital has delayed the finalisation of projects under Operational Programme Environment for wastewater treatment and waste management. Almost no municipality in Bulgaria can cope with the project implementation on its own and unless the payments it has made are reimbursed, explained representatives of the National Association of Municipalities in Bulgaria.

"The problem is that municipalities use the money received in advance as operating capital to settle accounts with their contractors," explained Malina Krumova, Director of OP Environment with the Ministry of Environment and Water.

Another problem is the lack of good financial management skills and planning. Possible solutions are being discussed now. There two main options, the Ministry of Finance announced. One possibility is associated with the FLAG fund. Another mechanism is the approved credit agreement for a loan from the European Investment Bank (EIB) for ensuring municipalities' own contribution of €700 mln, needed for the implementation of large infrastructure projects under OP Transportation, OP Environment and OP Regional Development.

According to legislative regulations, however, municipalities are not allowed to draw loans nine months before elections and this slows down the payment process. This restriction does not apply to the FLAG fund, but it has other limitations such as the amount of money that can be applied for.

Large projects like those for water infrastructure and facilities may not borrow money for ensuring bridge financing or co-financing under FLAG because no more than BGN 10 mln can be drawn under it.

“"n order to have a greater operating capital in 2010 we decided that advance payments would be 35% of the total value of the contract," said Minister of EU Funds Management Tomislav Donchev. According to him, the problem is essential at present and these issues will become more pressing in 2012 and 2013.

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