Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

FORMER YUGOSLAV REPUBLIC OF MACEDONIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

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 (foreign exchange bureaus and natural persons). 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 buying and selling rates (i.e., midpoint rates plus or minus a margin of 0.5%).
Foreign exchange bureaus, owned and operated by banks, enterprises, and natural persons, may hold foreign exchange in cash up to the specified maximum level, and must keep the balances above this level in a special account with the commercial banks of their preference.
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 natural persons 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, foreign exchange bureaus, and the entities providing prompt money transfer services. 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 arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on external tradeThe importation and exportation of gold require MOE approval.
Controls on exports and imports of banknotes
On exports
Domestic currencyUp 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 currencyResident 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; imports exceeding this limit require documentation from the custom authorities that commensurate banknotes were previously imported.
On imports
Domestic currencyThe limits governing exports apply.
Foreign currencyResidents 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). Nonresidents may import up to €2,000 without documentation; amounts exceeding that limit require documentation from the customs authorities 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. Resident juridical persons may open foreign exchange accounts upon presentation of their court registration.
Held abroadThe following residents are allowed to maintain accounts abroad: banks; government representatives; citizens of the former Yugoslav Republic of Macedonia who have an emigration visa or work permit with a validity of more than six months during the period of their stay abroad; juridical persons performing services in the international transportation of goods or passengers; investment companies, insurance companies, or scientific institutions; or juridical persons with a representative office or business unit abroad.
Approval requiredNBRM approval is required for residents other than authorized banks.
Accounts in domestic currency held abroadNo.
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 use these accounts without any restrictions. Other nonresidents may use 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 larger than 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 use accounts without restriction. Other nonresidents may use 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 (e.g., invoices, contracts) from natural and juridical persons in order to verify the purpose of the transaction. Additional documents (e.g., certificates from certain government authorities, credit application) are required for capital transactions, depending on the nature of imports.
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: (1) raw materials, zero to 2%; (2) machinery and equipment, 1% to 8%; (3) consumer goods, 15% to 35%; and (4) agricultural goods, 20% to 60%. The number of bands is 16 and the average rate is about 14.5%. A fixed customs fee equivalent to €19 applies to each tariff group identified in the import declaration, except for duty-free imports.
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 competent authorities.
Without quotasYes.
Export taxesA fee of 0.1% is levied for export promotion purposes by the MOE.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersCertain documents (such as invoices and contracts) are required for all payments in order to verify the purpose of the transaction. Personal payments up to the equivalent of €2,500 may be made without supporting documents.
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 are allowed to purchase securities issued in the former Yugoslav Republic of Macedonia. When investing in securities, nonresidents are required to open a custody account with a domestic commercial bank. Nonresidents do not open custody accounts when investing in (1) initial public offerings, (2) shares representing more than 10% of the voting rights or more than 10% of the equity of a shareholding company, or (3) private placements. All portfolio investments by nonresidents are subject to the payment of a premium for the right to buy foreign exchange from the central bank in case of repatriation of the investment. This premium is set quarterly by the central bank. Portfolio investments that have been committed for holding permits longer than one year are exempted from the premium. Nonresidents must register investments with the MOE within 60 days.
Sale or issue locally by nonresidentsNonresidents may issue or sell locally shares or other securities of a participating nature locally with permission from the Securities 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 a minimum BAA rating (according to Moody’s) or BBB (according to Standard and Poor’s). All residents may purchase securities traded on foreign stock exchanges with which the stock exchange of former Yugoslav Republic of Macedonia has an agreement. The Deposit Insurance Fund, insurance companies, pension funds, and investment funds may also purchase securities abroad in accordance with the appropriate laws.
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 sales or issue abroad by nonresidents, the SEC’s permission is not required.
Controls on credit operationsCredit activities following the conclusion of a contract must be registered with the NBRM.
Commercial creditsCommercial credits exceeding one year must be registered with the NBRM.
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentResidents must register investments with the MOE within 60 days.
Inward direct investmentNonresidents are allowed to invest in existing companies, establish their own firms, or establish joint ventures, under the same conditions as domestic investors. Nonresidents are not permitted to invest in a few sectors (such as arms production, trade in narcotics, and protection of historical and cultural heritage). Imports by joint-venture companies of raw materials, spare parts, and equipment not produced domestically are exempt from customs duties if the foreign share in the investment is at least 20%. All foreign investments registered with the MOE are protected from nationalization. The transfer of profits and other proceeds is permitted freely after meeting all tax obligations in the former Yugoslav Republic of Macedonia.
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. The government may acquire real estate abroad for diplomatic and consular purposes. Acquisitions of real estate must be registered with the Central Registry (CR) within 60 days.
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. Acquisitions of real estate must be registered with the CR within 60 days.
Sale locally by nonresidentsNonresidents may sell real estate to residents, after registration of the real estate with the CR.
Controls on personal capital transactions
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Gifts, endowments, inheritances, and legaciesTransfers related to inheritances require a reciprocity agreement.
By residents to nonresidentsDocumentary evidence (such as invoices or contracts) to verify the purpose of the transaction is required for payments exceeding the equivalent of €2,500.
To residents from nonresidentsIndividuals may receive grants in foreign currency without limits.
Transfer of assets
Transfer abroad by emigrantsYes.
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 guarantee capital. If the entity is a shareholder of a bank owning more than 5% of the voting shares, or a company in which the bank has an equity holding, the credit exposure to that entity may not exceed 10% of the bank’s guarantee capital.
Lending locally in foreign exchangeCommercial banks may lend in foreign exchange to residents for current payments abroad. If legal entities intend to use the loan proceeds domestically, the loan proceeds will be received in denar. Credit exposure to one person may not exceed 25% of a bank’s guarantee capital. The NBRM determines the conditions under which these transactions may be made.
Purchase of locally issued securities denominated in foreign exchangeCredit exposure to the issuer may not exceed 25% of a bank’s guarantee capital. If the entity is a shareholder of a bank owning more than 5% of the voting shares, or a company in which the bank has an equity holding, the credit exposure to that entity may not exceed 10% of the bank’s guarantee capital.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsEffective January 11, 2005, deposits in denars and in foreign currency are subject to a uniform reserve requirement of 10%.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsEffective January 11, 2005, deposits in denars and in foreign currency are subject to a uniform reserve requirement of 10%.
Investment regulations
Abroad by banksBanks are required to obtain prior approval from the NBRM and register these investments with the MOE within 60 days.
In banks by nonresidentsFor initial investments in banks by nonresidents, prior approval from the NBRM and registration with the MOF within 60 days are required. 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 is verified for purchases of shares exceeding 1% of capital.
Open foreign exchange position limitsThe limit on the open foreign exchange position is 20% of a bank’s guarantee capital for each foreign currency (for euros, 30%), and the limit on the aggregate open foreign exchange position is 50% of a bank’s guarantee 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 a bank’s guarantee capital, and the regulations governing capital market securities apply.
Limits (max.) on investment portfolio held abroadInsurance companies, pension funds, and investment funds may purchase securities abroad in accordance with respective laws governing their operations.
Limits (min.) on investment portfolio held locallyThe maximum limit is 25% of a bank’s guarantee capital.
Other controls imposed by securities lawsNo.
Changes During 2004
No significant changes occurred in the exchange and trade system.
Changes During 2005
Capital transactions
Provisions specific to commercial banks and other credit institutionsJanuary 11. Deposits in denars and foreign currency were made subject to a uniform reserve requirement of 10%.

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