Statement by the IMF Representative on Former Yugoslav Republic of Macedonia

This paper discusses the Former Yugoslav Republic of Macedonia’s (FYR Macedonia) Request for a Stand-By Arrangement and Extension of Repurchase Expectations. The authorities have asked the IMF to support an ambitious program that includes structural reforms that address the root causes of FYR Macedonia’s weak performance. On the macroeconomic front, the near-term aims of the program are to strengthen the exchange rate peg by increasing foreign exchange reserves and to manage the transition from official budget financing to market-based financing. The program also aims to secure medium-term fiscal sustainability.

Abstract

This paper discusses the Former Yugoslav Republic of Macedonia’s (FYR Macedonia) Request for a Stand-By Arrangement and Extension of Repurchase Expectations. The authorities have asked the IMF to support an ambitious program that includes structural reforms that address the root causes of FYR Macedonia’s weak performance. On the macroeconomic front, the near-term aims of the program are to strengthen the exchange rate peg by increasing foreign exchange reserves and to manage the transition from official budget financing to market-based financing. The program also aims to secure medium-term fiscal sustainability.

This statement provides information on developments since the issuance of the staff report for Former Yugoslav Republic of Macedonia’ Request for Stand-By Arrangement and Extension of Repurchase Expectations. It does not change the thrust of the staff appraisal.

On August 23, 2005 Standard & Poor’s raised FYR Macedonia’s sovereign credit ratings. In upgrading the ratings the agency cited progress towards political stabilization, labor market and judicial reforms, sustained macroeconomic stability, and downward trending debt levels. The long-term foreign currency rating was raised from BB to BB+ while the long-term local currency rating was raised from BB+ to BBB-, which is investment grade. The short-term local currency rating was raised from B to A-3 while the short-term foreign currency rating was kept at B.