Monetary policy in a transition economy: central banking, foreign discipline, and the end of domestic credit in Bulgaria (1990–2025)

This article examines Bulgaria’s post-Communist monetary transition, highlighting how institutional weaknesses and constraints shaped the country’s economic trajectory. Using a post-Keynesian monetary framework, it challenges the dominant view of the 1997 currency board as a stabilising success, arguing instead that it marked a long-term loss of monetary sovereignty. Despite early formal independence, the central bank lacked the regulatory knowledge to manage a two-tier banking system, leading to a collapse of domestic credit governance. The paper traces how subsequent banking sector consolidation resulted in a centralised, foreign-owned bank architecture that privileges large enterprises and urban centres, while marginalising small business lending and peripheral regions. This spatial asymmetry in credit allocation has entrenched structural inequality and weakened Bulgaria’s developmental prospects. By centring the role of bank credit in economic restructuring, the article contributes to post-Keynesian scholarship and invites further empirical research on the link between monetary institutions and development in post-Communist economies.