The World Bank Board of Executive Directors approved on January 8 2013 a guarantee in support of a commercial loan to the government of Macedonia in the amount of 155 million euro, the World Bank said in a statement.
The Public Expenditure Policy Based Guarantee (PEPBG) supports reforms to improve the efficiency of public expenditures and public financial management, strengthen health systems, and improve the targeting of social assistance and social inclusion, the Bank said.
The proposed PEPBG will help Macedonia access international financial markets to address an expected financing gap in 2013, the statement said.
The PEPBG is the second policy based guarantee for Macedonia, according to the Bank. A first guarantee, approved in November 2011, leveraged a total of 130 million euro from lenders in a virtually closed market environment.
The euro zone turmoil since then has adversely affected the economy of Macedonia.
Renewed market turbulence since May 2012 has again dimmed short-term growth prospects and access to capital markets, the Bank said.
The PEPBG will guarantee a partial amount of a commercial loan – 62 per cent of principal. This will allow the country to issue a relatively sizable commercial loan of 250 million euro, out of which 155 million euro would be guaranteed by the International Bank of Reconstruction and Development (IBRD).
“The main focus of this second guarantee is to ensure that fiscal policy, and public expenditure policy in particular, supports an environment conducive to growth, more effective social protection, and improved service delivery,” the World Bank said.
Key reforms support the gradual elimination of public payment arrears, and aim at improving financial management practices in the public sector, such as introducing safeguards to prevent future emergence of arrears, the Bank said.
“The repayment of arrears will support economic activity and private sector development, and is in line with long-term sustainability of public finances,” said Gerard Byam, World Bank Acting Country Director for FYR Macedonia. The proposed operation also supports reforms that will help mitigate the impact of the ongoing turmoil on vulnerable groups.
In a difficult external environment with continued uncertainty for the global economy and the risk of an intensification of the eurozone crisis, Macedonia has established and maintained a strong track record on macroeconomic stability, the Bank said.
“With the implementation of sound structural reforms, FYR Macedonia is laying the groundwork for economic recovery. Despite the current difficult environment, the growth outlook for FYR Macedonia is relatively positive,” said Birgit Hansl, World Bank Task Team Leader.
(Photo: Miroslav Sárička/sxc.hu)