A World Bank official on Wednesday warned that Bulgaria risks losing a $150 million loan unless it reforms its legal system and privatises its state-owned tobacco monopoly, Bulgartabac, the local media reported.

Andrew Vorkink, the World Bank director for Bulgaria and Romania, said the loan "may be jeopardised" unless Bulgaria demonstrates an "adequate progress of judicial reform and privatisation of Bulgartabac."

A deal to sell Bulgartabac to a Bulgarian-Dutch consortium owned by Deutsche Bank fell apart last March when the government and the consortium failed to agree on the terms of the acquisition.

The consortium, made up of a Bulgarian company, Tobacco Capital Partners, and a Dutch company, Clar Innis, had bid 110 million euros, $127 million, for 80% of Bulgartabac. However, it failed to agree with the government on a string of issues, in particular Bulgaria's plan to fix prices of raw tobacco crops by 2007.

The pro-market government of Prime Minister Simeon Saxe-Coburg-Gotha has also been unable lately to put through changes to its laws which the World Bank and the European Union have called for.

The EU says Bulgaria, which hopes to join the union in 2007, must first enact a string of legal changes, including provisions making it easier to replace judges. The Constitutional Court earlier this year revoked the government-sponsored law instituting such changes. The 12-judge court is empowered to annul laws if it funds them in violation of the constitution.

The loan at stake is the second tranche of a $450 million World Bank lending programme for Bulgaria. The bank has already paid the first $150 million tranche and its board is supposed to approve the second tranche by the end of this year.

(NewsBase 16.v.03)