04 August 2004
IMF Approves $11.7 Million Disbursement to FYR Macedonia
Completes final review of economic performance under standby arrangement
The International Monetary Fund (IMF) has approved an $11.7 million disbursement
to the former Yugoslav Republic of Macedonia after completing the final review
of the country's economic performance under the standby arrangement originally
approved on April 30, 2003.
"The FYR Macedonia authorities have achieved the core goal of the economic
program they adopted in early 2003 -- namely, to promote fiscal sustainability
following the 2001 security crisis," said Takatoshi Kato, IMF acting
chair.
IMF "looks forward to continued close collaboration with FYR Macedonia
in helping to prepare it to meet the considerable challenges ahead, as it
completes its transition to a market economy and adapts and strengthens institutions
and policies to gear up for greater integration with Europe," Kato said.
FYR Macedonia has drawn a total of $29.4 million during the 14-month arrangement
with the IMF.
Following is an IMF press release on the disbursement:
(begin text)
International Monetary Fund
700 19th Street, NW
Washington, D.C.
August 3, 2004
IMF EXECUTIVE BOARD COMPLETES FINAL REVIEW UNDER STAND-BY ARRANGEMENT WITH
THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA AND APPROVES US$11.7 MILLION DISBURSEMENT
The Executive Board of the International Monetary Fund (IMF) has completed
the second and final review of the former Yugoslav Republic of Macedonia's
economic performance under the Stand-By Arrangement. The decision will enable
FYR Macedonia to draw an amount equivalent to SDR 8 million (about US$11.7
million), which will bring total drawings to the equivalent of SDR 20 million
(about US$29.4 million).
The 14-month Stand-By Arrangement amounting to SDR 20 million was approved
on April 30, 2003. The arrangement was extended to August 15, 2004 after
the accidental death of President Boris Trajkovski earlier this year.
The Executive Board has also reviewed Macedonia's experience with Fund-supported
programs since the early 1990s, under the new guidelines on assessments of
countries with a longer-term program engagement.
Following the Executive Board discussion of Macedonia on August 2, 2004,
Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:
"The FYR Macedonia authorities have achieved the core goal of the economic
program they adopted in early 2003 -- namely, to promote fiscal sustainability
following the 2001 security crisis. They have achieved this by putting in
place a sound macroeconomic policy framework, which has brought the fiscal
deficit back to a sustainable level while maintaining the de facto exchange
rate peg to the euro. Significant and welcome progress was also made in strengthening
the NBRM's capacity to supervise foreign exchange related risks in commercial
banks. Despite mixed performance in some other areas, the program remains
broadly on track.
"Economic growth resumed in 2003, with low inflation, as a result of
the macroeconomic stabilization and the return of political stability. However,
growth, which slowed in early 2004, remains fragile. This, together with
the widening external current account deficit, persistent high unemployment,
and narrow export base underscores the need for further reforms.
"Going forward, it will now be crucial to complement sound macroeconomic
policies with structural reforms aimed at reforming the health sector, bolstering
the supervision of the banking and financial sectors, strengthening governance,
and improving the business environment, in order to strengthen and diversify
the sources of growth. Economic and financial policies could be improved
by implementing the remaining elements of the peace framework agreement in
a fiscally sound manner.
"Macroeconomic policies will need to be carefully managed during the
remainder of 2004. In the fiscal sphere, a key challenge will be to avoid
the stop-go outcome that characterized budget execution in 2003. Fiscal underspending
in the first half of the year should not lead to a sharp acceleration of
spending in the second half of the year-and especially a burst at year-end-which
could be destabilizing. The NBRM's interest rate policy will need to respond
quickly to current fiscal and balance of payments developments and to monetary
conditions more broadly.
"The Fund looks forward to continued close collaboration with FYR Macedonia
in helping to prepare it to meet the considerable challenges ahead, as it
completes its transition to a market economy and adapts and strengthens institutions
and policies to gear up for greater integration with Europe," Mr. Kato
said.
(end text)
(Distributed by the Bureau of International Information Programs, U.S. Department
of State. Web site: http://usinfo.state.gov)
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