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USIA - Text: Former Yugoslav Republic of Macedonia World Bank Loan, 97-05-06

United States Information Agency: Selected Articles Directory - Previous Article - Next Article

From: The United States Information Agency (USIA) Gopher at <gopher://gopher.usia.gov>


TEXT: FORMER YUGOSLAV REPUBLIC OF MACEDONIA WORLD BANK LOAN

(To support economic reform program) (690)

Washington -- The World Bank approved a $30 million loan and a $30 million International Development Association credit to the Former Yugoslav Republic of Macedonia in support of that government's economic reform program.

Following is the World Bank announcement.

(Begin text)

WORLD BANK AND IDA SUPPORT ECONOMIC REFORMS IN FORMER YUGOSLAV REPUBLIC OF MACEDONIA

WASHINGTON, May 6, 1997 -- The World Bank today approved a $30 million loan and a $30 million IDA (International Development Association) credit to the former Yugoslav Republic (FYR) of Macedonia in support of the government's economic reform program. The lending will help catalyze economic growth by promoting policy reforms in the trade and agricultural sectors and fostering private sector development.

Implementation of the country's trade and agricultural policies will alleviate the significant financial burden which current policies impose on the country's consumers and taxpayers. The Bank-assisted policy reforms will also help to integrate the country's economy into regional and world markets.

Since 1994, the government has pursued a vigorous economic reform program in its transition to a market economy. Despite successful economic stabilization, significant economic distortions in the trade and agricultural sectors continue to constrain the efficiency of the private sector, thereby undermining overall economic recovery. The Bank's loan and the IDA credit will help FYR Macedonia to move forward in promoting economic growth and reducing unemployment.

The government's economic reform priorities are to:

  • Liberalize trade policy further;
  • Reform agricultural policy;
  • Privatize socially-owned enterprises in agriculture; and
  • Complete the process of privatizing socially-owned industrial and commercial enterprises.
The Bank's loan and the IDA credit will support the government's efforts by helping to:
  • Consolidate the government's recent reforms involving price liberalization and bank privatization;
  • Complete the divestiture of socially owned industrial enterprises; and
  • Advance trade and agricultural policy reforms and extend privatization to the agricultural sector.
The $30 million loan (DM44.4 million) will be at the standard interest rate for LIBOR-based Deutsche-mark loans with a 20-year maturity, including a five-year grace period. The $30 million credit will be on standard IDA terms, with a 35-year maturity, including a 10-year grace period.

Since joining the World Bank and IDA in 1993, FYR Macedonia has received approximately $300 million in Bank/IDA commitments for eight projects.

Economic Transformation Background

As other transition economies, the FYR Macedonia has experienced, from its inception in 1991, major dislocations in production, employment, and social welfare. Economic management has been further complicated, until very recently, by financial, trade, and transit embargoes brought on by the regional military conflict and bilateral political difference. Between 1990 and 1995, recorded statistics show that real GDP fell nearly 30 percent, the volume of trade flows dropped about 40 percent, and the volume of investment in 1995 was less than half its 1990 level. The rate of registered unemployment increased from 17 percent in 1990 to 24 percent in 1995, and a large share of the working-age population dropped out of the labor force.

In 1994, the government implemented strict budgetary discipline and conducted strong incomes and monetary policies to turn the economy back from the brink of hyperinflation. Trade policy reform has removed quantitative restrictions and is helping to rationalize and lower the system of multiple import taxation and exemptions, strengthen export incentives, and consolidate trade policy functions. Agricultural policy reform aims to phase out budget subsidies for seed and credit, eliminate government financed price premia and guaranteed prices for selected commodities.

In April 1996, Parliament passed the Agricultural Privatization Law to assist in privatizing socially-owned enterprises in agriculture. By end- 1997, privatization measures will be undertaken for at least 70 percent of the eligible enterprises in agriculture. Completing the mainstream privatization program is another high priority. Approximately 800 enterprises from a total of 1,217 were privatized or liquidation proceedings were initiated with the help of the Bank's Financial Sector Adjustment Credit of $85 million approved in May 1995. By mid-1997, it is expected that 1,150 enterprises will have completed privatization proceedings.

(End text)


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