Chapter

FORMER YUGOSLAV REPUBLIC OF MACEDONIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: June 19, 1998.
Exchange Arrangement
CurrencyThe currency of the Former Yugoslav Republic of Macedonia is the Macedonian denar.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe exchange market operates at two levels: wholesale (enterprises, commercial banks, and the National Bank of the Republic of Macedonia (NBRM)) and retail (households). The NBRM participates in the wholesale market to maintain the value of the denar against the euro at a level that meets balance of payments objectives. Buying and selling rates for transactions between authorized banks and enterprises have to be reported to the NBRM, which calculates an average daily rate. Based on this rate and cross rates on the international market, the NBRM publishes rates for 12 currencies and deals at the published midpoint rates plus or minus a margin of 0.5%.
The retail level of the foreign exchange market consists of foreign exchange bureaus, which are owned and operated by banks, enterprises, and natural persons. Foreign exchange bureaus may hold foreign exchange in cash form up to the specified maximum level, but must keep balances above this level in a special account with commercial banks.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward foreign exchange operations are allowed for all residents.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsAll settlements must be in denars except for (1) purchases or sales of foreign exchange by individuals from authorized bureaus of exchange, (2) interest earnings on resident foreign exchange deposit accounts, (3) valuations of contracts among residents, and (4) extensions of credits from authorized banks to residents under conditions determined by the NBRM.
Payments arrangements
Bilateral payments arrangements
InoperativeAn agreement is maintained with Slovenia.
Administration of controlThe NBRM controls foreign exchange operations of banks, savings institutions, and foreign exchange bureaus. The MOF controls foreign exchange and trade operations and credit operations of natural and juridical persons for transactions not controlled by the NBRM. The customs authorities control cross-border transfers of goods, banknotes, securities, and gold. The Ministry of Economy (MOE) administers the New Trade Law.
International security restrictionsNo.
Payments arrears
PrivateYes.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeGold producers must report all production, including quality and quantity sold. Processors are also required to report all quantities bought and processed.
Controls on external tradeThe importation and exportation of gold require MOE approval. Only the NBRM may import and export monetary gold.
Controls on exports and imports of banknotes
On exports
Domestic currencyEffective October 25, 2003, up to MDen 20,000 may be exported in denominations of 500, 100, 50, or 10 denar banknotes in circulation or in the form of checks.
Foreign currencyEffective March 12, 2003, resident natural persons may export up to the equivalent of €2,000 without documentation or up to €4,000 with documentation issued by an exchange bureau or a bank (exports exceeding €4,000 are not permitted). Nonresidents may export up to €2,000 without documentation and up to the amount declared upon arrival in the country with documentation from the custom authorities. Previously, resident and nonresident natural persons could export up to the equivalent of €10,000 without documentation, and up to the amount declared to customs upon arrival in the country.
On imports
Domestic currencyThe limits governing exports apply.
Foreign currencyEffective March 12, 2003, residents may import up to the equivalent of €10,000 without documentation (imports exceeding this limit require prior NBRM approval in accordance with the Law on the Prevention of Money Laundering); and nonresidents may import up to €2,000 or the amount declared upon arrival in the country freely; amounts exceeding that limit require documentation in accordance with the law on the Prevention of Money Laundering.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident natural persons, upon proof of identity, may open and operate foreign exchange accounts without restriction, and resident juridical persons may open foreign exchange accounts only for their receipts from nonresidents without limitations on maturity and use them to make payments to nonresidents.
Held abroadThe following residents are allowed to maintain accounts abroad: banks; government representatives; natural persons with a permanent residence in the Former Yugoslav Republic of Macedonia and a valid resident visa or work permit issued abroad with a validity of more than six months during the period of their stay abroad; natural persons with a permanent residence in a foreign country and a valid visa or work permit issued in the Former Yugoslav Republic of Macedonia; and juridical persons performing services in the international transportation of goods or passengers, investment companies, insurance companies, or scientific institutions.
Approval requiredNBRM approval is required for residents other than authorized banks.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyOnly resident natural persons are permitted to maintain these accounts.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents may open foreign exchange accounts upon proof of identity. Nonresident diplomatic representatives of foreign countries or international institutions may operate these accounts, without any restrictions. Other nonresidents may operate accounts without restrictions except for cash withdrawals, which are limited to the equivalent of €10,000 a month.
Approval requiredNonresidents, other than diplomatic representatives of foreign countries or international institutions, must obtain a certificate from the customs authorities for cash deposits above the equivalent of €2,000.
Domestic currency accountsNonresidents may open denar accounts upon proof of identity. Nonresident diplomatic representatives of foreign countries or international institutions may operate accounts without restriction. Other nonresidents may operate accounts without restriction, except for cash withdrawals, which are limited to €10,000 a month in denar equivalent.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsCommercial banks require documents verifying the purpose of the transaction only.
Import licenses and other nontariff measures
Negative listImports of certain goods, such as weapons and medicines, are subject to licensing requirements for security or public health reasons.
Import taxes and/or tariffsThe following duty rates apply: on raw materials, zero to 2%; machinery and equipment, 1% to 8%; consumer goods, 15% to 35%; and agricultural goods, 20% to 60%. The number of bands is 16, and the average rate is about 14.5%. A fixed customs fee of the equivalent of €19 applies for each customs declaration. Duty-free imports of goods and services are exempt from this customs fee.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesGenerally, exports do not require a license. However, in some exceptional cases, the export of certain goods requires a license from the appropriate authorities.
Without quotasYes.
Export taxesA fee of 0.1% is levied on exports for promotional purposes by the MOE.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersDocumentary evidence is required for all payments, and personal payments are subject to a ceiling of the equivalent of €2,500.
Trade-related payments
Indicative limits/bona fide testYes.
Investment-related payments
Indicative limits/bona fide testYes.
Payments for travel
Indicative limits/bona fide testYes.
Personal payments
Quantitative limitsYes.
Indicative limits/bona fide testYes.
Foreign workers’ wages
Indicative limits/bona fide testYes.
Credit card use abroad
Indicative limits/bona fide testYes.
Other payments
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsNonresidents may open custody accounts for the purchase of securities, except for purchases (1) from initial public offerings; (2) of shares representing more than 10% of the voting rights or more than 10% of the equity of a shareholder company; or (3) of private placements. Commercial banks must pay a premium, established quarterly by the NBRM, for the right to buy foreign exchange to cover the security position of this custody account, except for the balances of the portfolio investments that have been committed for one year. Previously, nonresidents were allowed to acquire shares in domestic companies on the same terms as residents, but needed to register the investment with the MOE.
Sale or issue locally by nonresidentsNonresidents may issue or sell locally shares or other securities of a participating nature with permission from the Security and Exchange Commission (SEC).
Purchase abroad by residentsAuthorized banks may freely purchase abroad only (1) securities issued by an OECD member state or international financial institution and (2) securities with minimum Baa rating (according to Moody’s) or BBB (according to Standard and Poor’s). All residents may purchase abroad securities traded on the stock exchanges with which the stock exchange of the Former Yugoslav Republic of Macedonia has an agreement.
Sale or issue abroad by residentsPermission from the SEC is required for residents to issue securities abroad.
Bonds or other debt securities
Purchase locally by nonresidentsPurchases of bonds in private placements are treated as credit transactions; for other categories, the regulations for shares or other securities of a participating nature apply.
Sale or issue locally by nonresidentsThese transactions are permitted for debt securities with maturities of up to three years.
Purchase abroad by residentsThe regulations governing shares or other securities of a participating nature apply.
Sale or issue abroad by residentsYes.
On money market instrumentsThe regulations governing capital market securities apply.
On collective investment securitiesThe regulations governing capital market securities apply.
Controls on derivatives and other instrumentsThe regulations governing capital market securities apply. In the case of the sale or issue abroad by nonresidents, SEC permission is not required.
Controls on credit operationsPrior registration with the NBRM is required.
Commercial creditsEffective August 8, 2003, commercial credits exceeding one year (previously, 180 days) must be registered with the NBRM.
Controls on direct investment
Outward direct investmentEffective August 8, 2003, residents must register investments with the MOE within 60 days (previously, 30 days).
Inward direct investmentNonresidents are allowed to invest in existing firms, establish their own firms, or establish joint ventures, except in a few sectors (such as arms production, trade in narcotics, and protection of historical and cultural heritage). Imports of raw materials, spare parts, and equipment not produced domestically by joint-venture firms are exempt from customs duties if the foreign share in the investment is at least 20%. All foreign investment registered with the MOE is protected from nationalization. The transfer of profits and other proceeds is allowed freely after meeting all tax obligations.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsResidents in general are not allowed to acquire real estate abroad, except under the condition of reciprocity pursuant to the provisions of an international agreement, although the government may acquire real estate abroad for diplomatic and consular purposes. Effective August 8, 2003, acquisitions of real estate must be registered with the Central Registry (CR) within 60 days (previously, registration with the MOE within 30 days was required).
Purchase locally by nonresidentsNonresidents may acquire real estate locally pursuant to the provisions of a special law or an international agreement, under the condition of reciprocity. Effective August 8, 2003, acquisitions of real estate must be registered with the CR within 60 days (previously, they had to be registered within 30 days with the MOE).
Sale locally by nonresidentsNonresidents may sell real estate to residents, subject to registration of the real estate with the CR.
Controls on personal capital transactions
Gifts, endowments, inheritances, and legaciesTransfers related to inheritances require a reciprocity agreement.
By residents to nonresidentsDocumentary evidence is required for payments exceeding the equivalent of €2,500.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Credit exposure to one entity may not exceed 25% of a bank’s regulatory capital.
Lending locally in foreign exchangeCommercial banks may lend in foreign exchange to residents for current payments abroad, but credit exposure to one person may not exceed 25% of a bank’s regulatory capital. The NBRM determines the conditions under which these transactions may be made.
Purchase of locally issued securities denominated in foreign exchangeCredit exposure by an issuer may not exceed 25% of a bank’s regulatory capital.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsEffective June 11, 2003, deposits in denars and in foreign exchange are subject to a uniform reserve requirement of 7.5%. Previously, only deposits in denars were subject to reserve requirements (10% for demand deposits and 5% for time deposits).
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsEffective June 11, 2003, the reserve requirement is 7.5% for all deposits. Previously, reserve requirements were 10% for denar demand deposits and 5% for denar time deposits.
Investment regulations
Abroad by banksEffective August 8, 2003, banks are required to obtain prior approval from the NBRM and register these investments with the MOE within 60 days (previously, 30 days).
In banks by nonresidentsFor initial investments, nonresidents must obtain prior approval from the NBRM and report these investments to the MOF within 60 days. Prior approval from the NBRM is also required when additional investments reach 5%, 10%, 20%, 33%, 50%, and 75% of capital shares. In addition, the source of funds must be disclosed for purchases of shares exceeding 1% of the capital.
Open foreign exchange position limitsThe limit on open foreign exchange position is 20% of a bank’s regulatory capital for each foreign currency (for euros, 30%), and the limit on aggregate open foreign exchange position is 50% of a bank’s regulatory capital.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsThe maximum limit for a resident or nonresident issuer is 20% of the bank’s regulatory capital, and the regulations governing capital market securities apply.
Limits (max.) on investment portfolio held abroadEffective August 8, 2003, insurance companies, pension funds, and investment funds may purchase securities abroad in accordance with respective laws governing their operations. Previously, these transactions were not allowed.
Limits (min.) on investment portfolio held locallyThe maximum limit is 25% of a bank’s regulatory capital.
Other controls imposed by securities lawsNo.
Changes During 2003
Arrangements for payments and receiptsOctober 25. Exports and imports of banknotes (in denominations of 500, 100, 50, or 10 denars) and/or checks were allowed up to the equivalent of MDen 20,000.
March 12. Resident natural persons were allowed to export up to the equivalent of €2,000 without documentation, or up to the equivalent of €4,000 with documentation, and nonresidents were allowed to export up to €2,000 without documentation, or up to the amount previously imported. Previously, a limit of €10,000 applied in both cases.
March 12. The regulations on imports of foreign currency notes were revised as follows: (1) for residents, up to the equivalent of €10,000 without documentation (imports exceeding this limit require prior NBRM approval in accordance with the Law on the Prevention of Money Laundering); and (2) for nonresidents, imports exceeding the equivalent of €2,000, or the amount declared upon arrival in the country, require documentation.
Capital transactions
Controls on credit operationsAugust 8. Commercial credits exceeding one year (previously, 180 days) were required to be registered with the NBRM.
Controls on direct investmentAugust 8. Residents were required to register investments with the MOE within 60 days (previously, 30 days).
Controls on real estate transactionsAugust 8. Purchases of real estate abroad by residents and purchases locally by nonresidents were required to be registered with the CR (previously, the MOE) within 60 days (previously, 30 days).
Provisions specific to commercial banks and other credit institutionsJune 11. Deposits in denars and in foreign exchange were made subject to a uniform reserve requirement of 7.5%. Previously, only denar deposits were subject to reserve requirements (10%) for demand deposits and 5% for time deposits).
August 8. Banks were required to obtain prior approval from the NBRM for investments abroad and report them to the MOE within 60 days (previously, 30 days).
Provisions specific to institutional investorsAugust 8. Insurance companies, pension funds, and investment funds were allowed to purchase securities abroad in accordance with respective laws governing their operations. Previously, these transactions were not allowed.

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