Macedonia Pushes Forward With IMF Loan Plan

Macedonia is likely to finalize talks this week on a €400 million loan from the International Monetary Fund aimed at filling the country’s budget gap. Macedonian Finance Minister Zoran Stavreski confirmed on Monday that the country and the IMF are getting closer to a deal, explaining that he will hold a round of meetings with IMF representatives who are in the country in the coming days. The two-year loan with an annual interest rate of 1.3 per cent “will be at least €400 million”, the minister told reporters. While it is almost certain that Macedonia will take the loan, the Finance Ministry plans to keep its options open.

“We might not start spending the money right away,” Stavreski explained. “If the conditions on the global market are favourable, Macedonia could issue Eurobonds” to fill the budget gap and ”if not, we can start using the IMF loan”. Minister Stavreski also noted that some of the IMF money might be used for capital investments. Over the past two years several local economic experts have advised that the government strike a deal with the IMF because of the lower interest rates.

However, the government has insisted on issuing state bonds that, while more expensive to pay back, give the state an open hand in its spending policy. The local economy has been hit hard by the global financial crisis, and the state has struggled to collect planned revenue which has created problems for the budget. The country's flagship metal industry and all other export oriented industries have suffered in particular. The government plans to keep the budget deficit at some €180 million in 2011, or 2.5 percent of the GDP.

News source: BalkanInsight link: article