In the eight month since sweeping into power, pressured by insufficiency tax revenue, Bulgaria’s ruling party GERB is starting to fulfill its promise to shed minority stakes in various companies.

The aim is to at least partially plug revenue shortfalls and rein in the deficit so that it does not cross the 3% mark, a scenario that would diminish Bulgaria’s chances for swift entry into the ERM II -- the two-year currency stability test before the country can drop the lev and adopt the euro.

By the end of this week, a state consolidation company will be formed that will lump together minority holdings in 55 companies, finance minister Simeon Djankov and his deputy Vladislav Goranov said on Monday. The list features the 33% government share in power distributors, minority state holdings in Kempinski Hotel Zografski, etc.

The consolidated company will offer the stakes on the Bulgarian Stock Exchange (BSE), which is the most transparent and a relatively quick procedure, according to Djankov.

Through an in-kind contribution of minority stakes into the parent company, the difference between the face value and the selling price will count as profit, which will serve as advance dividend payment into the state budget as soon as this year. Thus, the government will skirt the law on the Silver Fund -- a structure set up to offset the extra costs of ageing after 2020 -- which stipulates that the entire privatisation revenue should be used to support the pension system in the future.

The announcement comes amid continuing decline in Bulgaria’s foreign direct investment (FDI) and domestic consumption, as seen by the Bulgarian National Bank (BNB). It also follows the governments’ thwarted attempt to lift healthcare contribution rates, which was at the end of the day swapped for a plan to strip public-sector employees of their welfare preferences.

Speaking to Dnevnik yesterday, employer and union representatives welcomed the government’s sell-off plan, even though they were staunch supporters of the Silver Fund when it was set up in 2008.

Preliminary estimates show the sale of minority state holding via the BSE could bring approximately BGN 500 million for 2010.

The juiciest assets -- such as Bulgartabac’s cigarette factories, the subsidiaries of the Bulgarian Energy Holding (BEH), heating utility Toplofikatsia Sofia -- will be left out of the privatisation scheme.

The Confederation of Employers and Industrialists in Bulgaria (CEIBG) has calculated the Bulgarian government could pocket almost EUR 3 billion if it sells its majority and minority stakes in 18 lucrative companies.