site.btaJoining Eurozone Is More Urgent than Ever, Euro to Bring Bulgaria Five Key Benefits - Central Bank Governor

Bulgaria's long-standing ambition to join the euro area is more relevant – and more urgent – than ever given the unstable international environment, Bulgarian National Bank Governor Dimitar Radev says in a publication for OMFIF - State Street Global Advisors on Monday. According to Radev, joining the eurozone will bring Bulgaria five key benefits. 

"Euro adoption will have five sets of repercussions. It will anchor Bulgaria’s monetary policy within the European Central Bank framework, and provide credibility, stability and predictability. Furthermore, it will reduce currency risk and protect the economy from speculative pressure; enhance investor confidence and deepen financial integration; and offer access to euro area mechanisms, such as the European Stability Mechanism," Radev argued.

According to him, in a world where policy volatility is structural, euro area membership will strengthen Bulgaria’s strategic resilience – through institutional alignment and enhanced crisis response tools.

"At present, the composition of Bulgaria’s foreign exchange reserves is shaped by our legal mandate and the operational logic of the currency board. About 90% of our reserves are held in euros, with the remaining 10% in gold," the central bank's head specifies.

"Credit and currency risks are tightly constrained. Eligible assets must carry a minimum AA– rating. This conservative, short-duration approach has served us well during periods of market stress, " he goes on to say.

"Looking ahead, euro area accession will mark a new phase in reserve management. The new law on the Bulgarian National Bank introduces greater flexibility. With the euro becoming our domestic currency, we will begin to diversify our foreign exchange reserves into other currencies. We are already laying the groundwork – developing new operational infrastructure, expanding our network of counterparties and building deeper market expertise. We will also adjust our risk framework, relaxing the credit threshold of the securities we hold from AA- to A- and extending the investment horizon from short-term to strategic, long-term. These reforms will broaden our investment universe – potentially including instruments such as exchange-traded funds. Naturally, any such instruments will be subject to rigorous assessment to ensure alignment with our core objectives: capital preservation and liquidity assurance," the publication reads.

As global fragmentation becomes a defining feature of the international landscape, central banks must adapt, Radev argues. "We must continue to uphold the core principles of reserve management – liquidity, safety and return – while increasingly addressing geopolitical and systemic risks," he adds.

"Strategic positioning will be just as important as financial fundamentals. For the Bulgarian National Bank, this means maintaining resilience under today’s currency board – while preparing for a more dynamic, risk-aware reserve management strategy in the very near future," the Bulgarian National Bank Governor believes.