BULGARIA: AS FLOOD WATERS FALL, EXTENSIVE COSTS

UNCLAS SECTION 01 OF 02 SOFIA 001545

SIPDIS

E.O. 12958: N/A
TAGS: EAID PREL ASEC BU
SUBJECT: BULGARIA: AS FLOOD WATERS FALL, EXTENSIVE COSTS
LOOM; AGRICULTURE HIT HARD

Ref: A) SOFIA 1224; (B) SOFIA 1272; (C) SOFIA 1398 (D) SOFIA

1404;


1. SUMMARY: Though government officials are still
completing on-site damage assessments, their preliminary
estimate of flood losses stands at one billion leva (USD 625
million) and 10 deaths. A recent USDA report shows the
agricultural sector has sustained substantial damage,
estimated at USD 160 million. Flood waters have affected
many areas of agricultural production, resulting in crop and
livestock losses and damage to agricultural infrastructure
and equipment. To date, the government has extended a total
of 247.5 million leva (USD 155 million) for immediate flood
recovery operations, but continues to rely on EU assistance
to cover most of the damages. USAID has provided a total of
USD 450,000 to CARE-Bulgaria and the Bulgarian Red Cross for
flood recovery operations. END SUMMARY.

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COST OF FLOODING CONTINUES TO RISE
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2. The figure of USD 625 million in damages is likely to be
revised upward, as both government and municipal bodies
continue on-site damage assessments, revealing the full
scope of the disaster. According to preliminary information
from the government, about 16,000 homes and buildings were
damaged by the floods. Nearly 200 residential buildings
were completely destroyed and another 1,292 residential
buildings remain uninhabitable. In addition, hundreds of
bridges, dikes and drains, as well as substantial segments
of the railroad and road systems, were damaged.

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AGRICULTURAL SECTOR HIT HARD
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3. Flood waters had a substantial effect on agricultural
production, resulting in the loss of crops and livestock and
damaging agricultural infrastructure and equipment. The
government's preliminary assessment estimates agricultural
sector losses at 72 million Bulgarian leva (USD 45 million),
of which USD 2 million is due to damaged rural
infrastructure. However, it expects total damages in the
agricultural sector alone to reach 123 million leva (USD 77
million). The actual cost will be better known after
flooded areas have been drained. Regions planted with
sunflower and wheat were the hardest hit agricultural areas.


4. A recent USDA report, however, estimates total losses to
the agriculture sector even higher at USD 160 million. The
report finds that of the estimated loss to the agriculture
sector, 43 percent is due to reduced yields in total grain
production; 11 percent to reduced grape production; and 9
percent each to reduced vegetable and fruit production.
Livestock losses have been estimated at 6,000 pheasants;
2,407 poultry; 426 beehives; 267 pigs and 124 sheep. The
report also shows that the damage to the irrigation
infrastructure, most of which was built in the 1950-60s, is
estimated at 31 million Bulgarian leva (USD 19 million).
There are other non-quantifiable costs, including reduced
competitiveness of Bulgarian agricultural products due to
deteriorated quality and higher production cost, the need
for more expensive imports due to short supply of local
produce for the canning industry and wine manufacturers, and
increased consumer prices.

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NEW CABINET SETS PRIORITIES, RELIES ON FOREIGN AID
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5. While a Parliamentary ad-hoc commitee is preparing a
draft crisis management law, the newly-approved government
has outlined its basic emergency relief and rehabilitation
efforts. The short-term objectives are to ensure that
schools are ready for the new school year, identify and
tailor assistance to different household needs, accommodate
those left without homes, clean up river beds, restore dikes
and rehabilitate roads and railroad infrastructure. To this
end, the government has extended a total of 247.5 million
Bulgaria leva (USD 155 million) for immediate flood relief.
Of this total, 9 million leva is for financial assistance
for the worst-hit households, with each household entitled
to receive 1,000 Bulgarian leva (USD 625). The government
earmarked 120 million Bulgaria leva (USD 75 million) for
repairing infrastructure.


6. Bulgaria continues to rely on EU assistance to provide
most of the financial resources. The Bulgarian Finance
Ministry has sent a second request to the EU for the amount
of 850 million Bulgaria leva (USD 531 million),having
revised their initial request, which was only for 75 million
euro. In view of the extensive damage from the flooding,
the Bulgarian government plans to request that EU funds
slated for other pre-accession programs be re-directed for
flood-related assistance.

7. In the meantime, Bulgaria has received humanitarian aid
from individual countries and international donor
organizations totaling 1,061,000 euro. In addition to an
initial USD 50,000 to the Bulgarian Red Cross, USAID
provided USD 400,000 to CARE-Bulgaria for flood recovery
operations. CARE-Bulgaria used these funds to procure a
variety of needed resources, including drinking water, food,
disinfectants, bedding and blankets, protective clothes for
working in water, and inflatable boats with outboard motors.
CARE-Bulgaria is also distributing public awareness leaflets
on basic sanitation and disinfectant usage. (Note: The
Embassy's public diplomacy program surrounding these
donations has been exceptionally effective. Our assistance
has been warmly recognized throughout the government and the
country. End Note.) Hungary recently announced that it will
also provide humanitarian aid (primarily disinfectants).


8. COMMENT: Though the waters have receded and
humanitarian aid has eased the most urgent effects of the
flooding, substantially higher costs of the overall damage
are looming. This could well be the most costly flooding in
Bulgaria's history, and the Bulgarian government will need
substantial assistance. Aside from the lack of financial
resources necessary for flood recovery operations, longer-
term problems including proper crisis management law and
clear-cut guidance for emergency relief and rehabilitation
must also be addressed. Although the economy in the first
half of the year remains on solid footing, the recent
flooding will likely have a negative impact. Agricultural
sector output, which accounts for less than 10 percent of
GDP, will shrink further, and flood recovery operations will
entail substantial budgetary expenses. The central bank has
already taken notice, cautioning that flood recovery
operations will push demand up, possibly leading to higher
inflation. The IMF has also warned that budgetary
discipline must still be maintained even in the face of this
disaster. END COMMENT

BEYRLE