EBRD increases support for upgrade of Bulgarian municipal infrastructure

By EBRD  Press Office

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In response to the scarcity of commercial funding, the EBRD is enhancing its support for the rehabilitation of municipal infrastructure in Bulgaria by increasing its loan to the Bulgarian Fund for Local Authorities and Governments in Bulgaria (FLAG) with an additional €35 million.

Established by the Bulgarian government in 2007, FLAG is a funding vehicle aimed at facilitating co-financing of local infrastructure projects that can benefit from EU grant funds. In December 2008 the EBRD extended a €35 million credit to FLAG to support municipal projects alongside Unicredit and HYPOInvestmentbank.

The types of projects supported by FLAG include local water and sewer investments, waste management, local road rehabilitation and energy efficiency measures in public buildings. Sub-loans are also used for project preparation, including feasibility studies and preparation for grant applications.

As a result of reduced availability of commercial lending, the demand for FLAG funds has significantly increased. The current pipeline of FLAG projects exceeds €115 million. The number of requests for FLAG funds is expected to grow even more together with the expected the demand for co-financing of municipal projects.

The increased loan from the EBRD will enable FLAG to sustain achievements to date and continue to implement the much-needed projects in the current difficult market conditions with new and longer term credits.

“Through this transaction the EBRD is stepping in to support the Bulgarian government’s efforts to strengthen the institutional capacity of the local authorities to develop suitable projects in the new challenging circumstances. With the EBRD support, FLAG will be able to continue to co-finance the preparation and implementation of important EU funded investments at the local municipal level despite the current economic downturn,” said Jean-Patrick Marquet, EBRD director for Municipal and Environmental Infrastructure.

To date FLAG has approved 29 sub-loans to 26 municipalities, with a total value of more than €16.5 million. These funds will support EU grants of approximately €40 million, provided to help upgrade Bulgaria’s infrastructure to EU standards and facilitate the integration of less developed regions into the national and international economy.

It is envisaged that the FLAG programme will be able to support around 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.

Since the beginning of its operations in Bulgaria, the EBRD has committed over €1.8 billion in more than 120 projects in the financial services, corporate, infrastructure and energy sectors. Working with its many partners, the Bank has mobilised more than €6.6 billion for projects in Bulgaria.

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