Statement by the IMF Staff Representative February 27, 2008

International Monetary Fund

doi:10.5089/9781451826142.002.A002

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Statement by the IMF Staff Representative February 27, 2008

Author: International Monetary Fund

Publication Date:: 21 Mar 2008

eISBN:: 9781451826142

Language:: English

Keywords:: ISCR; CR; inflation increase; inflation pressure; consumer price inflation; government; interest rate increase; wage expenditure; year-on-year food price increase; IMF staff estimate; central government from the NBRM; FYR Macedonia; Inflation; Arrears

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Macedonia’s economic performance under the program has remained strong, reflecting the authorities’ commitment to build on the progress made and to advance the reform agenda. The average inflation rate was 2.3 percent, although it started to pick up recently owing to a relatively high increase in food prices, reflecting the global trend. On the expenditure side, the authorities will improve the quality of spending and redirect public spending to more productive uses, such as health, education, and infrastructure.

Abstract

This statement provides information on developments since the issuance of the staff report. It does not change the thrust of the staff appraisal.

1. As anticipated in the staff report, all quantitative performance criteria for end-December were met (table). The indicative target on net domestic assets of the banking system was missed by a small margin, due to higher than expected private credit growth.

Table.

FYR Macedonia: Quantitative Performance Criteria and Indicative Targets for 2007

(Targets and Actual Outcomes)

Sources: Data provided by the authorities; and IMF staff estimates.

^{^1/}This total includes wage expenditures of 1.3 billion denars made by local governments to cover functions transferred to them in the context of decentralization in October 2007 and classified as transfers in the central government’s fiscal accounts.

Table.

FYR Macedonia: Quantitative Performance Criteria and Indicative Targets for 2007

(Targets and Actual Outcomes)

				Mar-07	Jun-07	Sep-07	Dec-07
				(In million euro)
				End of Period Stocks for Program Evaluatio
Floor for net international reserves of the NBRM				1,130	1,186	1,247	1,259
		Adjustor		-43	-127	-135	-166
		Revised target		1,087	1,059	1,112	1,093
		Actual		1,224	1,267	1,366	1,360
Ceiling on new nonconcessional medium- and long-term external debt contracted
or guaranteed by the general government or the NBRM with original maturities
of more than 1 year				38	64	89	103
		Actual		0	0	53	61
Ceiling on new non-concessional medium and long-term external debt contracted				25	33	52	60
by the public enterprises with original maturities of more than 1 year (indicative)				0	0	0	0
		Actual
Ceiling on short-term external debt of the central government or the NBRM
with maturities of up to 1 year (stock); including guarantees for such debt				0	0	0	0
		Actual		0	0	0	0
Accumulation of external payments arrears				0	0	0	0
		Actual		0	0	0	0
				(In billion denars)
				Quarterly Stocks for Program Evaluation
Ceiling on net domestic assets of the NBRM				-47.2	-48.9	-51.8	-50.1
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-44.6	-41.1	-43.5	-39.9
		Actual		-53.3	-54.0	-59.5	-54.2
Ceiling on net domestic assets of the banking system (indicative)				35.5	42.4	45.9	55.6
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		38.1	50.2	54.2	65.8
		Actual		35.8	50.2	52.3	68.7
Ceiling on net domestic credit to the central government from the NBRM				-24.7	-23.6	-24.6	-19.7
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-22.1	-15.8	-16.3	-9.5
		Actual		-23.5	-17.3	-22.2	-12.8
Ceiling on central government domestic arrears excluding suppliers (indicative)				0	0	0	0
		Actual		0	0	0	0
Ceilings on central government domestic arrears to suppliers (indicative)				0.6	0.6	0.6	0.6
			o/w non HIF domestic central government arrears	0.4	0.4	0.4	0.4
		Actual		0.3	0.4	0.3	0.2
			o/w non HIF domestic central government arrears	0.3	0.4	0.3	0.2
Ceiling on arrears of the Health Insurance Fund (indicative)				0.2	0.2	0.2	0.2
		Actual		0	0	0	0
				Cumulative Flows within the Year for Program Evaluation
Ceiling on central government wages (indicative)				…	…	…	26.0
		Actual		…	…	…	24.9 ^1/
Floor for central government fiscal balance				0.3	0.5	0.8	-3.4
		Adjustor		0	0	0.4	0.4
		Revised target		0.3	0.5	1.2	-3.0
		Actual		2.0	5.3	11.7	3.8
	Memo item: Program exchange rate			61.3	61.3	61.3	61.3

Sources: Data provided by the authorities; and IMF staff estimates.

Table.

FYR Macedonia: Quantitative Performance Criteria and Indicative Targets for 2007

(Targets and Actual Outcomes)

				Mar-07	Jun-07	Sep-07	Dec-07
				(In million euro)
				End of Period Stocks for Program Evaluatio
Floor for net international reserves of the NBRM				1,130	1,186	1,247	1,259
		Adjustor		-43	-127	-135	-166
		Revised target		1,087	1,059	1,112	1,093
		Actual		1,224	1,267	1,366	1,360
Ceiling on new nonconcessional medium- and long-term external debt contracted
or guaranteed by the general government or the NBRM with original maturities
of more than 1 year				38	64	89	103
		Actual		0	0	53	61
Ceiling on new non-concessional medium and long-term external debt contracted				25	33	52	60
by the public enterprises with original maturities of more than 1 year (indicative)				0	0	0	0
		Actual
Ceiling on short-term external debt of the central government or the NBRM
with maturities of up to 1 year (stock); including guarantees for such debt				0	0	0	0
		Actual		0	0	0	0
Accumulation of external payments arrears				0	0	0	0
		Actual		0	0	0	0
				(In billion denars)
				Quarterly Stocks for Program Evaluation
Ceiling on net domestic assets of the NBRM				-47.2	-48.9	-51.8	-50.1
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-44.6	-41.1	-43.5	-39.9
		Actual		-53.3	-54.0	-59.5	-54.2
Ceiling on net domestic assets of the banking system (indicative)				35.5	42.4	45.9	55.6
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		38.1	50.2	54.2	65.8
		Actual		35.8	50.2	52.3	68.7
Ceiling on net domestic credit to the central government from the NBRM				-24.7	-23.6	-24.6	-19.7
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-22.1	-15.8	-16.3	-9.5
		Actual		-23.5	-17.3	-22.2	-12.8
Ceiling on central government domestic arrears excluding suppliers (indicative)				0	0	0	0
		Actual		0	0	0	0
Ceilings on central government domestic arrears to suppliers (indicative)				0.6	0.6	0.6	0.6
			o/w non HIF domestic central government arrears	0.4	0.4	0.4	0.4
		Actual		0.3	0.4	0.3	0.2
			o/w non HIF domestic central government arrears	0.3	0.4	0.3	0.2
Ceiling on arrears of the Health Insurance Fund (indicative)				0.2	0.2	0.2	0.2
		Actual		0	0	0	0
				Cumulative Flows within the Year for Program Evaluation
Ceiling on central government wages (indicative)				…	…	…	26.0
		Actual		…	…	…	24.9 ^1/
Floor for central government fiscal balance				0.3	0.5	0.8	-3.4
		Adjustor		0	0	0.4	0.4
		Revised target		0.3	0.5	1.2	-3.0
		Actual		2.0	5.3	11.7	3.8
	Memo item: Program exchange rate			61.3	61.3	61.3	61.3

Sources: Data provided by the authorities; and IMF staff estimates.

2. Twelve-month consumer price inflation increased from 6 percent in December to 9 percent in January, driven by an 18 percent year-on-year food price increase. There has also been a slight increase in non-food price inflation, but this remains low at around

3 percent year-on-year. However, year-average inflation for 2008 now appears likely to exceed the staff report’s projection of 4 to 5 percent.

3. The National Bank of the Republic of Macedonia has responded by increasing its key policy interest rate to 5.25 percent, and has issued a statement indicating that it would further tighten monetary policy if necessary. The staff believes this response is appropriate. The exchange rate anchor and continued prudent fiscal policy should help to pull back inflation. However, the authorities should stand ready to adjust their plans (including by repeating last year’s fiscal overperformance, or through further interest rate increases) should inflation increase or the current account deficit widen beyond the projected level.

4. Recent tensions in Kosovo have had no discernible impact on Macedonian financial markets.

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Former Yugoslav Republic of Macedonia: Third Review Under the Stand: By Arrangement and Request for Rephasing of Access: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement

Author: International Monetary Fund

Volume/Issue:: Volume 2008: Issue 107

Publisher:: International Monetary Fund

ISBN:: 9781451826142

ISSN:: 1934-7685

Pages:: 78

DOI:: https://doi.org/10.5089/9781451826142.002

Keywords

Table.

FYR Macedonia: Quantitative Performance Criteria and Indicative Targets for 2007

(Targets and Actual Outcomes)

				Mar-07	Jun-07	Sep-07	Dec-07
				(In million euro)
				End of Period Stocks for Program Evaluatio
Floor for net international reserves of the NBRM				1,130	1,186	1,247	1,259
		Adjustor		-43	-127	-135	-166
		Revised target		1,087	1,059	1,112	1,093
		Actual		1,224	1,267	1,366	1,360
Ceiling on new nonconcessional medium- and long-term external debt contracted
or guaranteed by the general government or the NBRM with original maturities
of more than 1 year				38	64	89	103
		Actual		0	0	53	61
Ceiling on new non-concessional medium and long-term external debt contracted				25	33	52	60
by the public enterprises with original maturities of more than 1 year (indicative)				0	0	0	0
		Actual
Ceiling on short-term external debt of the central government or the NBRM
with maturities of up to 1 year (stock); including guarantees for such debt				0	0	0	0
		Actual		0	0	0	0
Accumulation of external payments arrears				0	0	0	0
		Actual		0	0	0	0
				(In billion denars)
				Quarterly Stocks for Program Evaluation
Ceiling on net domestic assets of the NBRM				-47.2	-48.9	-51.8	-50.1
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-44.6	-41.1	-43.5	-39.9
		Actual		-53.3	-54.0	-59.5	-54.2
Ceiling on net domestic assets of the banking system (indicative)				35.5	42.4	45.9	55.6
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		38.1	50.2	54.2	65.8
		Actual		35.8	50.2	52.3	68.7
Ceiling on net domestic credit to the central government from the NBRM				-24.7	-23.6	-24.6	-19.7
		Adjustor		2.6	7.8	8.3	10.2
		Revised target		-22.1	-15.8	-16.3	-9.5
		Actual		-23.5	-17.3	-22.2	-12.8
Ceiling on central government domestic arrears excluding suppliers (indicative)				0	0	0	0
		Actual		0	0	0	0
Ceilings on central government domestic arrears to suppliers (indicative)				0.6	0.6	0.6	0.6
			o/w non HIF domestic central government arrears	0.4	0.4	0.4	0.4
		Actual		0.3	0.4	0.3	0.2
			o/w non HIF domestic central government arrears	0.3	0.4	0.3	0.2
Ceiling on arrears of the Health Insurance Fund (indicative)				0.2	0.2	0.2	0.2
		Actual		0	0	0	0
				Cumulative Flows within the Year for Program Evaluation
Ceiling on central government wages (indicative)				…	…	…	26.0
		Actual		…	…	…	24.9 ^1/
Floor for central government fiscal balance				0.3	0.5	0.8	-3.4
		Adjustor		0	0	0.4	0.4
		Revised target		0.3	0.5	1.2	-3.0
		Actual		2.0	5.3	11.7	3.8
	Memo item: Program exchange rate			61.3	61.3	61.3	61.3

Sources: Data provided by the authorities; and IMF staff estimates.

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