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| World Bank Headquarters in Washington, DC [PHOTO: Shiny Things/CC BY 2.0] |
Washington: The World Bank Board of Executive Directors has approved a
guarantee in support of a commercial loan to the Government of FYR Macedonia in
the amount of EUR 155 million.
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 proposed PEPBG will
help FYR Macedonia access international financial markets to address an
expected financing gap in 2013.
The PEPBG is the second policy based guarantee for FYR
Macedonia. A first guarantee, approved in November 2011, leveraged a total of
EUR 130 million from lenders in a virtually closed market environment. The
Eurozone turmoil since then has adversely affected the economy of FYR
Macedonia. Renewed market turbulence since May 2012 has again dimmed short-term
growth prospects and access to capital markets. The PEPBG will guarantee a
partial amount of a commercial loan – 62 percent of principal. This will allow
the country to issue a relatively sizable commercial loan of EUR 250 million,
out of which EUR 155 million 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. 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 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, FYR Macedonia has established and maintained a strong track
record on macroeconomic stability.
“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.
The FYR Macedonia IBRD portfolio comprises five investment
projects with a net commitment of EUR 335 million.