The Derailment of Bulgaria’s National Railways

Bulgarian National Railways (BDZ) have exited since 1866 and have been under government control since 1885. According to the CIA World Factbook, Bulgaria currently has over 4,000 km of railways all serviced by BDZ, which is also one of the most indebted public companies in the country. In the past few months, the future of BDZ has come into question due to the continuing inability for the company to pay its debts. Exacerbated by the ongoing ‘debt crisis’ in Europe, this is just one more problematic situation to take into account for the Bulgarian government.

In an continuous battle to save Bulgaria’s railway system from bankruptcy, the Ministry for Transport, Information Technology and Communications has been pursuing ways to save the BDZ. On October 3rd 2011, it was announced that the company would receive a 480 million leva (245 million Euro) loan from the World Bank under the condition that it could increase its income to the point where it can at least cover the interest on its earlier loans. These lines of credit amount to approximately 800 million leva (410 million Euro) and no installments have been made since 2008. This is due to the fact that the estimated loss of BDZ until September of this year is 25 million leva (13 million Euro).

In addition to these financial troubles, BDZ is not seen as a trustworthy company. A recent audit of its material capital reportedly showed that around 600 freight cars were “missing”. According to the BDZ Board of Directors this is due to a technical problem with the way the cars were listed in official records. However, it was due to this ‘technical problem’ that the audit was ordered, including the fact that the last inventory of the company was conducted in 2001. The outcome – for the last 10 years, the freight section of BDZ has been operating 600 freights cars that do not exist.

In the current situation, BDZ is facing a vicious circle. On October 11th, it was announced that the company would lose half of its newest passenger trains (one of its greatest assets) because it has not repaid the credit used to buy the machines. The bank which issued the credit has initiated a procedure for the sale of the trains in question, which would lead to a major disruption in the train schedules in Bulgaria. Indirectly, this would hit BDZ’s attempt to raise profits in order to repay its loans, and would also cause it to lose the newly negotiated credit from the World Bank.

From the perspective of the Bulgarian government, there is nothing that can be done. The budget does not have the possibility to bail-out the national railway company and the current European debt crisis is not helping. Possible privatization has been explored as an option and BDZ’s freight service is already being auctioned. However, whether Bulgaria’s citizens will be able to use trains in order to travel in the near future remains questionable. Many might simply decide not to take a risk and use the already booming private bus transportation system. If a further passenger decrease occurs, then BDZ’s losses would increase even more. It seems that Bulgaria’s National Railways is going to be derailed.

Advertisements

One response to “The Derailment of Bulgaria’s National Railways

  1. Dear Lubo,

    As I remember was taught in school to us that railway is the most environmental friend nicest modern way of transportation of people and goods which should be and will be developed and supported through all ways as part of our European future. But something went wrong with it in Eastern Europe. Instead of developing that we see that railways are ruining especially in CEEU countries and 90% of goods are transported via trucks on public roads polluting our environment making traffic jams and accidents. I am leaving near M0-M5 highway crossing in Hungary. Thousands of trucks are driving that way from East to West and back. Terrible accidents and traffic jam almost each day and making terrible noise and pollution. How nice was the Hungarian railways service in the 80s 90s when trucks were taken on wagons by rail from one border to the other. The cargo biz of MAV Hungarian Railways were privatized and sold to the Austrian railways who immediately demolished and closed its operations. Also people are using less and less the rail for traveling as wagons are old dirty and nasty and ticket is getting too expensive.
    Our governments instead of building and investing in moder environmental friend future of transport they are just letting to develop more and even facilitating the most polluter ways of transportation and destroying the rails.

    Rgrds, Laci

    KL

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s