The FINANCIAL — In order to assist the Bulgarian local authorities in identifying, developing and financing municipal projects that can be supported by EU grants and will improve the efficiency of local services, the EBRD is extending a €35 million loan to the Bulgarian Fund for Local Authorities and Governments (FLAG).
The EBRD funds will help upgrade Bulgaria’s infrastructure to EU standards and facilitate the integration of less developed regions into the national and international economy.
FLAG is an innovative funding vehicle established by the Bulgarian Government to facilitate and extend the involvement of commercial bank funding in financing local infrastructure projects that can benefit from EU grant funds. FLAG will target a medium tier of municipalities that have financial capacity but are unable to access long-term financing from other sources, and it is expected that the programme will be able to support around 50-100 municipalities out of the total of 263. The FLAG programme will help Bulgaria and its local governments to efficiently utilise the available EU funds.
The types of projects which will be supported include local water and sewer investments, waste management, and local road rehabilitation. Sub-loans will also be used for project preparation, including feasibility studies and preparation for grant applications.
At total of €18 million of the loan will be retained for the EBRD’s account, and the remaining €17 million will be syndicated to commercial banks, including UniCredit, which will also act as a credit manager for the FLAG.
“With this project the EBRD is supporting the Bulgarian government’s efforts to strengthen the institutional capacity of the local authorities to develop suitable projects. This innovative programme will combine EBRD institutional experience and local commercial bank municipal lending skills in co-financing local infrastructure projects which will allow for further expansion of the commercial bank lending in this sector,” James Hyslop, EBRD Director for Bulgaria said.
“FLAG is very enthusiastic to have EBRD as a long-term financial and technical partner. Using the bank’s expertise would allow us to provide prompt and well-targeted assistance to the Bulgarian local governments supporting their efforts in implementing the EU co-funded investment projects.” Dimcho Mihalevski, Chairman of the Board of Directors of FLAG.
This project builds on EBRD’s extensive experience in Bulgaria in providing co-financing, as well as project development and implementation assistance for local infrastructure projects. To date, the EBRD has invested 130.4 million in support of municipal projects in the country, and a total of more than €1.7 billion across a number of sectors.
FLAG is registered as a joint stock company wholly-owned by the Government which has already provided approximately €15 million for its initial share capital. This capital contribution will also be used to make sub-loans for eligible investments. FLAG is managed through a board involving government representatives, representatives of the National Association of Municipalities in Bulgaria and the EBRD.