Press Release: IMF Approves US$28 Million Stand-By Credit for the Former Yugoslav Republic of Macedonia
April 30, 2003

former Yugoslav Republic of Macedonia and the IMF

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Former Yugoslav Republic of Macedonia—Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding
April 15, 2003

The following item is a Letter of Intent of the government of the Republic of Macedonia, which describes the policies that the Republic of Macedonia intends to implement in the context of its request for financial support from the IMF. The document, which is the property of the Republic of Macedonia, is being made available on the IMF website by agreement with the member as a service to users of the IMF website.
 

Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, DC 20431
U.S.A.

Dear Mr. Köhler,

The attached Memorandum of Economic and Financial Policies for 2003-04 (MEFP) describes the program that the Government of the Republic of Macedonia will implement during the remainder of 2003 and the first quarter of 2004, with the intention of reversing financial imbalances related to the 2001 insurgency crisis and setting the stage for a resumption of economic growth after the severe recession in 2001-02.

In support of the program we request a 14-month Stand-by Arrangement in an amount of SDR 20 million, equivalent to 29 percent of quota. The prior actions for the approval of the arrangement listed in Table 2 have been implemented.

Our arrangements under the IMF's Poverty Reduction and Growth Facility and the Extended Fund Facility, which were approved by the Executive Board in late 2000, went off track in the wake of the 2001 insurgency crisis. In spite of adverse circumstances, much of the agenda covered by those arrangements was completed, including in the areas of enterprise reform and privatization, tax reforms and reforms of the treasury and the payments system. We have also made progress in liberalizing trade and foreign exchange operations and have recently completed our accession to the WTO. We remain committed to further structural reforms, for which we are also seeking support from the World Bank and other international financial institutions, as well as the EU and bilateral donors.

We believe that the policies set forth in the attached MEFP are adequate to achieve the objectives of our program but we will take any further measures that may become appropriate for this purpose. We will consult with the Fund on the adoption of these measures, in accordance with the Fund's policies on such consultations, and we will consult with the Managing Director in advance of any revisions of the policies covered in this MEFP.

Sincerely,

/s/
Branko Crvenkovski
Prime Minister

/s/


Petar Gošev
Minister of Finance
 

/s/


Ljube Trpeski
Governor
National Bank of the Republic of Macedonia



Memorandum on Economic and Financial Policies for 2003-04

I. Introduction

1. This memorandum outlines the Government's economic program for the period January 2003-March 2004, for which support is being requested from the International Monetary Fund (IMF) under a new 14-month Stand-By Arrangement (SBA).

2. After a generally favorable economic outturn in 2000, economic activity slowed markedly in 2001, as the March-August security crisis disrupted production and sapped consumer and business confidence. Real GDP declined by 4½ percent in 2001 and grew by only 0.3 percent in 2002. The contraction affected all sectors in the economy except government, where activity was boosted by security-related spending. Thanks to the successful management of the de facto fixed exchange rate, inflation averaged about 5¼ percent in 2001 (in spite of the security crisis) and declined to 2.4 percent in 2002.

3. The fiscal deficit of the general government widened to 6¼ percent of GDP in 2001 because of the slowdown in economic activity and new expenditures related to security operations. A fiscal consolidation was planned in 2002 but did not materialize owing to the postponed demobilization of reservists and to expenditure overruns in the run-up to the parliamentary elections.

4. Despite high levels of foreign exchange outflows throughout 2001 and 2002, the National Bank of the Republic of Macedonia (NBRM) managed to retain a relatively comfortable level of official reserves—equivalent to about 4 months of next year's imports of goods and services at end-January 2003. The outflow of reserves, which reflected mainly the impact of security-related imports, sluggish exports, and a crisis-induced erosion of market confidence in the denar, was mitigated by receipts from the telecom privatization in 2001, the inflow of donor finance in 2002, and tight monetary policy implemented by the NBRM.

5. On the structural front, there was progress in several areas. Five loss-making state-owned enterprises were sold or liquidated; the largest of these, which was sold, has now resumed production. The regulatory framework for bank supervision has been strengthened and the health of the major banks is improving, though a few smaller banks have experienced problems. The Government successfully implemented a new and modern payments system in mid-2001. Starting in early 2002, important treasury reforms were implemented: the treasury single account approach was implemented and the treasury took over payment functions for budget users. Finally, a new Foreign Exchange Law, which came into effect in October 2002, further liberalized the foreign exchange regime by permitting certain credit and portfolio operations.

II. Objectives and Policies for 2003-04

A. Strategy and Macroeconomic Framework

6. The political normalization and the implementation of the Peace Framework Agreement (PFA) have set the stage for a resumption of economic growth. We now intend to implement a program that creates the economic basis for sustained growth and increased employment. The main elements of the program are: a fiscal adjustment to reverse the crisis-related imbalances and restore fiscal sustainability; maintaining the fixed exchange rate anchor, with comfortable reserve cover; and implementing pro-market structural reforms in the labor market. In this climate real GDP is projected to grow by 3 percent in 2003 and 4 percent in 2004. Average inflation is projected to remain at about 3 percent per annum.

B. Fiscal Policy and Budget Reforms

7. Given the large fiscal deficits over the last two years, fiscal adjustment is a key objective of the program. Adjustment is needed both in order to stabilize Macedonia's net public debt ratio at about 40 percent of GDP, and in order to lower interest rates and create room for more private sector credit. Consistent with these objectives the Government intends to reduce the general government deficit to 2 percent of GDP in 2003 and to the debt-stabilizing level, about 1¼ percent of GDP, in 2004. Taking into account expected externally financed expenditures by the Road Fund, this would imply a central government budget deficit of 1.6 percent of GDP in 2003 and 0.9 percent of GDP in 2004. The 2003 budget, which was enacted in March 2003, was prepared within this framework.

8. The budget allocates resources to PFA-related expenditures that are not funded by donors, including the costs of hiring members of under-represented minority groups into the police force-500 of the 600 police to be hired in 2003. Other PFA-related costs, such as those related to equipment and technical assistance, are expected to be covered by grants committed at the March 2002 donor meeting. The Government has also sought technical assistance from the European Union for an updated assessment of the budgetary costs of implementing the PFA.

9. General government revenues are expected to decline to 33.7 percent of GDP in 2003 from 35.9 percent of GDP in 2002. The decline in revenue reflects mainly the elimination of the distortionary financial transaction tax, which was introduced during the crisis. In addition, recent free trade agreements with countries in the region and with the EU, and the elimination of the 1 percent fee for processing customs documentation, have reduced reliance on customs revenues. In order to close the fiscal gap and strengthen the revenue base for the medium term, the VAT has been restructured by moving most non-food items from the preferential 5 percent rate to the standard rate, which in turn has been reduced from 19 percent to 18 percent. Food, potable water, and some printed materials (including newspapers, magazines and educational books) continue to be taxed at 5 percent. The measure is expected to increase revenue from the VAT by about 1.8 billion denars (0.7 percent of GDP) in 2003. In order to cushion the social impact of the VAT increase, the price of electricity per kilowatt-hour in each category of household electricity consumption will be increased by 7 percent (effective July 1, 2003; structural performance criterion) instead of the 12½ percent required for a full passthrough of the change in VAT rates—electricity rates to enterprises already reflect the full passthrough. To compensate for the own revenue shortfall the electricity company (ESM) will suffer as a result of the less-than-full passthrough, ESM will introduce cost-cutting measures, including laying-off regular employees (in April 2003, which provide savings of about 200 million denars during this year). However, the government is committed not to weaken the financial position of ESM. To this end, if these measures prove insufficient, the need for additional increases in electricity prices will be assessed prior to completing the first program review.

10. VAT administration will be strengthened in line with advice from the IMF's Fiscal Affairs Department (FAD). The Public Revenue Office (PRO) will continue to devote a significant part of its effort to comprehensive audits of the 100 largest tax payers. The VAT law has been amended to eliminate the need to file annual returns. The PRO will develop an action plan—including an intensification of forced collections—to reduce VAT arrears. The plan will be implemented starting end-June at the latest. The PRO will define criteria and procedures for unilateral deregistration of small taxpayers. In addition, steps have been taken to create and staff a financial police unit with the mandate to investigate financial crimes, including tax fraud and money laundering. The financial police will cooperate closely with the PRO.

11. The Government intends to reduce general government expenditures to 35.7 percent of GDP in 2003 from 41.5 percent of GDP in 2002. The key elements of expenditure policy are:

  • Security-related expenditures are being reduced from the crisis levels. The demobilization of reservists will be completed in March for the police and by December for the army. In spite of these cuts, security-related spending remains 1.4 percentage points of GDP higher than before the crisis.

  • The salary scale will not be raised during the program period. The decompression of the civil service salary structure has been postponed to 2004.

  • Public sector employment will be frozen on a net basis, except for net hiring of professional soldiers, 600 police (in line with the PFA), and special police units (which will be partly integrated into regular police units).

  • Legislation mandating large increases in child allowances has been repealed. (The increases, which were never implemented, failed to target the sectors of the population in need of assistance).

  • The transfers from the central government budget to the Health Fund in 2003 will be limited to 500 million denars. The fund is introducing a number of cost-cutting measures (providing savings of about 800 million denars, or 0.3 percent of GDP, in 2003) that will not affect the coverage and quality of healthcare: the number of employees will be reduced in April 2003 to save about 220 million denars during this year, the list of subsidized drugs used by pharmacies and hospitals will be changed to exclude high priced drugs that have lower priced substitutes, and competitive tenders with a 12-month commitment period will be launched for the procurement of medicines.1

  • Agricultural subsidies will be limited to 685 million denars, about 400 million less than in 2002.2 There will be no further earmarking of tax revenues for the Agricultural Fund. Instead, the budget will transfer 160 million denars to the Fund, while the central government budget will settle the Agricultural Fund's outstanding debt (440 million denars).

  • All non-strategic commodity reserves will be sold and there will be no further net purchases in strategic reserves.

  • Expenditures on other goods and services will be brought back to the pre-crisis levels in real terms.

  • With the completion of projects funded by privatization receipts, general government capital expenditure will be reduced to pre-crisis levels, about 3 percent of GDP (excluding the foreign-financed portion of public sector investment projects).

12. In addition, we are developing plans for 30 budget-using agencies, which are performing non-core activities. The government will decide which agencies will be rationalized, downgraded, divested or closed, starting in 2003.

13. Further efforts will be made to improve expenditure management. The budget authorization and payments functions of the treasury system in the Ministry of Finance will be expanded to include monitoring and control of certain types of expenditure commitment and payments arrears effective September 2003. The relevant amendments to the Law on Budgets and the Law on Public Procurement will constitute a structural benchmark under the program. In addition, the 2003 budget execution law introduces provisions requiring parliamentary approval for the expenditure by first tier budget users of special revenues (other than external project loans and grants) in excess of budget allocations. Furthermore, procedures will be strengthened to ensure that the budgetary impact of legislation submitted to parliament by the government continue to be first assessed by the Ministry of Finance.

14. In order to improve liquidity management, the government's stabilization fund, external account and privatization account, (all at the NBRM) will be consolidated, In time, the budgets of public funds will be monitored and executed through the treasury system and their accounts will be consolidated with the treasury single account. The Government will initiate, before end-June 2003, an external audit of the financial position and procurement procedures of the Health Fund (which accounts for 15 percent of general government expenditure), with terms of reference that will be specified in consultation with Fund and World Bank staff. The audit will constitute a structural benchmark under the program.

15. The implementation of decentralized government, which is at the core of the PFA, is also a step towards a more modern and democratic society. Based on the framework set out in the Law for Local Self-Government, the Government intends to speed up preparations for fiscal decentralization, including by: adopting remaining laws, completing detailed sector plans for transferring responsibilities to the local level, and building up administrative capacity at the local level. The Government also intends to implement as soon as possible recommendations prepared by the FAD technical assistance mission on local government financing, in particular with regard to the regulations regarding the collection and distribution of local fees and taxes. Special emphasis will be given to the development of sector policies, which in turn will have to be phased so as to ensure that decentralization can be accomplished in a way that preserves accountability for the resources transferred to municipalities. The Law of Local Finance and other supporting legislation will be prepared in consultation with the IMF and other donors.

C. Monetary and Exchange Rate Policies

16. The National Bank of the Republic of Macedonia (NBRM) will continue to orient monetary policy toward maintaining the de facto fixed exchange rate. Real exchange rate indicators suggest that external competitiveness is adequate. In 2003, the improved fiscal position and donor support will ease the pressure on monetary policy and should create scope for a gradual lowering of interest rates on NBRM bills. The NBRM will continue to monitor foreign exchange flows and, in the event of pressure on the foreign exchange market, will take appropriate measures, including exchange market interventions, operations with NBRM bills and adjustments of interest rates. As recommended by the MAE, the NBRM has recently strengthened the interbank exchange market by introducing new operating procedures that have increased the market's efficiency and transparency including by requiring all banks to quote bid and offer rates. An effect of the change was to bring the market rate into alignment with the central bank rate.

17. The NBRM has developed a monetary program that is consistent with maintaining the de facto fixed exchange rate and increasing gross foreign exchange reserves to the equivalent of 4 months of imports. The demand for money (excluding government deposits in banks) is projected to increase by almost 7 percent in 2003, roughly in line with the expected increase in nominal GDP growth. The stock of foreign currency deposits is also projected to increase in line with economic activity. Net credit from the banking system to the general government is projected to increase by only about denar 3 billion, consistent with a 9½ percent growth in bank credit to the private sector.3

18. The auction of 28-days bills is the primary monetary policy instrument of the NBRM. The bill auctions will mainly be by volume tender in order better to signal the central bank's views on the interest rate. Also, the NBRM will make the Lombard facility more flexible, in line with the recommendations of the IMF's Monetary and Exchange Affairs Department (MAE) recent technical assistance mission: the facility will be available each working day (instead of 5 calendar days a month); the requirement for collateral in the form of central bank bills will be reduced from 182 percent of the loan to 105 percent; and the interest rate will be administered more flexibly.4 The NBRM will unify the required reserve ratio on denar demand and time deposits at 7½ percent compared with, respectively, 10 percent and 5 percent at present. In addition, the NBRM will introduce a 7½ percent reserve requirement on foreign currency deposits, with reserves to be held in foreign exchange and remunerated at market-related interest rates. The introduction of the reserve requirement on foreign currency deposits will create a level playing field, help address prudential concerns arising from the expansion of foreign currency denominated and indexed lending, and will also absorb the liquidity created by the repayment of frozen foreign currency bonds maturing in 2003. As for future years, the Ministry of Finance will prepare a debt management strategy to address the recurrent financing needs resulting from the amortization of these bonds. To this end the government will put in place during 2003 the legislative and institutional framework necessary for issuing treasury bills and longer-term securities.

19. The NBRM recently abolished the practice of guaranteeing or pledging assets in support of activities performed by the private sector, public enterprises, or public funds. Existing guarantees will be allowed to expire. No further guarantees will be provided.

D. Structural Policies

20. In support of the macroeconomic stabilization policies laid out above, the Government intends to launch a structural reform program with strong pro-employment components. The key elements of this program include: measures to increase the flexibility of the labor market; a range of active labor market policies; the completion of the privatization process; the resolution of the remaining loss-making enterprises; a program to support small and medium-sized enterprises (SME's); and the deepening of banking sector reforms. Moreover, the Government is committed to improving public sector governance and transparency, which will be essential to reactivate the business sector and attract foreign direct investments over the medium-term.

21. The high unemployment rate is partly a reflection of labor market rigidities that reduce the incentives for job creation. The Government therefore intends to make the labor market more flexible by scaling back over-generous unemployment benefits and severance packages. In particular, the Law on Employment and Unemployment Insurance will be amended by end-May 2003 to limit the duration of unemployment benefits to a scale rising to a maximum of 14 months for the unemployed with more than 15 years of service. In addition, the Law on Labor Relations will be amended by end-May 2003 to reduce the legally required severance pay from the present level, one month for every two years of service, to one month for every three years. These two measures will constitute structural benchmarks under the program. In addition, in order to reduce the scope for court challenges of lay-offs, we will review the rules and procedures for terminating employment, and seek ways to make them simpler and clearer. In addition, the Government, with World Bank assistance, will carry out a comprehensive review of the labor code and associated legislation with the goal of identifying additional areas for reform that would serve to increase labor market flexibility.

22. The structural reforms of the labor market will be accompanied by low-cost active labor market policies. These include refocusing the efforts of the Employment Fund on job placement services, vocational training, and the establishment of a job database. Also, the Government will implement a strategy supporting the development of SME's, including the creation, with technical assistance from SEED (the IFC-managed SME facility in the Balkans), of a fund for providing partial loan guarantees to SMEs. The loan guarantee fund will be fully-financed by donor grants.

23. Consistent with the policy of increasing the flexibility of the labor market, the Government will oppose amendments to the Law on Employment and Unemployment Insurance that would allow some or all workers with more than 25 years of service to obtain unemployment benefits until retirement.

24. In order to stimulate employment, and in the context of the program to restructure loss-making enterprises, we will put in place a subsidy program for enterprises that increase their employment above a pre-specified baseline number. The subsidy will be paid over a fixed period of 24 months, starting on the day when the program is put in place. In order to target the incentive on low-income groups the subsidy will be of a fixed size: the level of social contributions payable on a net salary of 8,000 denars. In order to target the incentive on the long-term unemployed, the newly hired employee must have been unemployed for at least 12 months. Finally, in order to limit the budgetary impact of the operation, its overall cost will be limited to 1.7 billion denars during 2003-05.

25. Preparations are underway to sell or close the remaining loss-making enterprises covered by the World Bank FESAL by end-2003. By end-2003, the Government also intends to sell by auction all remaining shares in state-owned enterprises held by the Privatization Agency and to close the Privatization Agency. Though this will bring the privatization process to an end, there will continue to be an urgent need to strengthen governance in already privatized enterprises. To this end, we intend to force restructuring or ownership change by: ending access to subsidies; enforcing debt collection, including wages, loans, and taxes; and by rapid and efficient enforcement of bankruptcy procedures. Moreover, strong measures will be taken against corruption, including through the judicial prosecution of proven offenders and zero tolerance for corruption in the government ranks, and government interference in private business activity will be reduced.

26. The ability of banks to channel domestic savings into productive activities in the private sector will be essential for achieving high and sustainable economic growth. On this basis, the ongoing efforts to improve the performance of the banking system will be sustained through strict enforcement of supervisory and prudential regulations. In particular, the NBRM will strengthen its monthly monitoring of the foreign exchange exposure of banks by requiring information on the composition of assets and liabilities (including breakdowns by the maturity and purpose of borrowing), will encourage banks to exercise prudence when lending to clients without foreign currency denominated income, and will stand ready to take corrective measures as necessary. Moreover, with the purpose of defining an exit strategy for the six banks currently under enhanced monitoring, the NBRM will enforce the implementation of corrective actions imposed in the course of on-site examinations. Failure to implement corrective actions by end-June 2003 will result in sanctions, such as suspension of all or particular banking operations for a certain period of time or revoking the operating license of the bank.

27. Further measures to strengthen the banking sector and bank supervision will be defined in the light of the findings of the forthcoming Financial Sector Assessment Program (FSAP) missions and will be incorporated into program conditionality at the first review under the program.

28. The Government will seek parliamentary approval of amendments to the Central Bank Law, which will make the NBRM solely responsible for the conduct of exchange rate policy and strengthen the governor's role in proposing the vice governors of the NBRM. Also, the Government intends to seek parliamentary approval of an amendment to the Banking Law, that lowers the threshold for central bank approval of changes in shareholding structure from 10 percent to 5 percent. The Foreign Exchange Law will be amended to allow banks to extend credits denominated in foreign currency to increase their ability to compete with foreign banks. The draft laws will be prepared in consultation with the IMF and will be enacted by end-April, 2003.

29. The audit of the final statements of the NBRM for 2002 by an independent external auditor based on international auditing standards will be completed and published by July 31, 2003 according to the recommendations of the IMF's Stage One safeguards assessment of the NBRM (structural benchmark). Further actions in this area reflecting the recommendations of the February/March 2003 IMF safeguards assessment mission will be incorporated into program conditionality at the time of the first review of the program.

30. A program to restructure the one remaining state owned bank, the Macedonian Bank for Development Promotion, will be developed and adopted by the government before end-2003. Its primary role will become to promote Macedonian exports and provide assistance to exporters in the form of export guarantees and insurance on market terms.

31. In the area of trade policy: tariff free quotas, which are allocated on first-come first-served basis, will be allocated quarterly instead of semi-annually to limit the scope for market dominance by few trading companies.

III. External Financing Requirements

32. The balance of payments position deteriorated in 2001-02 because of the security crisis, but an improvement is projected for 2003. Exports are expected to recover, reflecting new contracts in the textile industry and the reopening under new ownership of a large formerly loss-making enterprise. Imports are projected to increase moderately as imports of used cars (which peaked in 2002 owing to a relaxation of import restrictions) return to a normal level. Private transfers, which had declined during the security crisis, increased in 2002 and are expected to remain at the higher level. On this basis, the external current account deficit, excluding grants, is projected to decline from 11.2 percent of GDP in 2002 to about 9.3 percent of GDP in 2003. Further improvements in the external position are expected in 2004, as increasing export demand continues to fuel the economic recovery. The external reserves targets specified in paragraph 17 of this memorandum are expected to be met with the help of balance of payments support of US$180 million from the IMF, World Bank, EU, and the governments of the U.S. and the Netherlands.

33. The external debt burden is moderate. At end-2002, the stock of medium- and long-term external debt (of the government and the non-government sector) is estimated to amount to the equivalent of 39 percent of GDP while debt service payments are estimated at about 16.5 percent of exports of goods and services. The Government will continue to limit the amount of new external debt that it contracts or guarantees on non-concessional terms under the program. As of end-January 2003 there were no outstanding external payments arrears as defined in the Technical Memorandum of Understanding. The Government will not accumulate new arrears in the future.

34. Since bilateral negotiations with Paris Club creditors have been protracted, and in order to demonstrate goodwill on Macedonia's part, we have taken the initiative of depositing amounts corresponding to Macedonia's technical arrears to Japan and Kuwait in an interest-bearing escrow account at a bank chosen in consultation with the Paris Club Secretariat. At the same time we will continue to press for a quick resolution of outstanding issues.

IV. Program Monitoring

35. Performance under the program will be monitored through quantitative performance criteria and indicative targets for end-March 2003, end-June 2003, end-September 2003, and end-December 2003, as well as one structural performance criterion and five structural benchmarks (Tables 1 and 2). Targets for end-March 2004 will be defined at the time of the first review. The quarterly quantitative targets include: (i) ceilings on net domestic assets of the NBRM; (ii) floors on net international reserves of the NBRM; (iii) ceilings on net credit to the general government from the banking system; (iv) floors on minimum central and general government fiscal balances; (v) ceilings on contracting or guaranteeing new non-concessional medium- and long-term external debt by the government or the NBRM; (vi) ceilings on the level of short-term external debt or guarantees by the government and the NBRM, except for normal import-related credits; (vii) ceilings on government domestic payments arrears and Health Fund arrears (indicative); (viii) ceilings on central government wage bill (indicative); (ix) ceilings on the net domestic assets of the banking system (indicative); and (x) ceilings on personnel expenditures financed from special revenue accounts (indicative). During the program period, the Government will not accumulate external payments arrears, impose restrictions on the making of payments and transfers for current international transactions, introduce or modify multiple currency practices, conclude bilateral agreements inconsistent with Article VIII of the IMF's Articles of Agreement, or impose or intensify import restrictions for balance of payments reasons. Details of the monitoring of the quantitative targets, including definition of adjusters, are provided in the Technical Memorandum of Understanding (Attachment II).

36. The program will be subject to two reviews by the IMF scheduled for early September 2003 and mid-February 2004. The first review will cover end-June 2003 performance under the program as well as the strategy to resolve problems of the 6 banks under enhanced supervision and its implementation. Based on the findings of the upcoming FSAP missions, the first review will, if appropriate, propose additional structural measures in the financial sector area. The second review will cover end-December 2003 performance, the budget for 2004 and medium term policies relating to the implementation at the PFA. The completion of the second review will be conditioned on the Parliamentary approval of the 2004 budget in line with program understandings (the general government deficit of 1¼ percent of GDP).


1In the meantime, and in line with World Bank recommendations, the Government will make preparations for re-tendering pharmaceutical supplies with international competitive bidding in 2004.
2Of this, 160 million denars will be transferred from the budget, another 211 million will be transferred from the Ministry of Agriculture budget, and up to 315 million will be the proceeds of sales of stocks of wheat and tobacco.
3The figure excludes the effect of moving certain government deposits to other items net. The deposits in question correspond to interest and principal on frozen foreign currency bonds which matured before January 1, 2003 but have not yet been claimed.
4The requirement for collateral in the form of government bonds will not be reduced because government bonds are relatively illiquid and trade at large discounts.


Table 1. Quantitative Performance Criteria and Indicative Targets for 2003
under the Proposed Stand-By Arrangement1

      2003
      End-Mar.
Indicative
End-Jun. End-Sep. End-Dec.
    2002
Actual

(Cumulative changes since end-December 2002)

    (in millions of U.S. dollars)
Floor for net international reserves of the NBRM
End-year stocks

654         
-80          -16      -52        1         
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 . . .           0          25      210        250        
  Of which: with maturities of 1–5 years . . .           0          0     30        30         
Ceiling on short-term external debt of the general government or the NBRM with maturities of up to 1 year (stock); including guarantees for such debt 0          0          0      0        0         
Accumulation of external payments arrears on a continuous basis 0          0          0      0        0         
    (in millions of denars)
Ceiling on net domestic assets of the NBRM -25,128          3,154          -67      2,174        752         
             
Ceiling on net domestic assets of the banking system (indicative) 9,456         4,382          3,562      7,400        6,629         
             
Ceiling on net domestic credit to the general government from the banking system -5,186          4,516          2,575      4,989        3,907         
Ceilings on central government domestic arrears (indicative)          
  Excluding those to suppliers 0          0          0        0        0         
  To suppliers 597          0          0        0        0         
Ceilings on health fund arrears (indicative) 1,711          0          0        0        0         
Ceiling on the central government wage bill (indicative) Annual flows

18,339         
5,143          10,429        15,527        20,953         
Ceiling on personnel expenditures financed from special revenue accounts (indicative) 640          188          375        563        750         
Floor for central government fiscal balance -13,019          -1,685          -3,132        -4,021        -4,075         
Floor for general government fiscal balance -13,554          -1,630          -3,513        -4,627        -5,117         

Sources: The FYRM authorities; and IMF staff.
1Adjustments to quantitative targets under the program are described in the Technical Memorandum of Understanding.


Table 2. Prior Actions, Structural Performance Criterion, and Structural Benchmarks

A. Prior Actions

1.

(i) Parliament has adopted a 2003 budget consistent with the policies defined in the Memorandum of Economic and Financial Policies (MEFP ¶7).

   
 

(ii) Parliament has adopted the 2003 budget execution law with provisions requiring parliamentary approval for the expenditure by first tier budget users of special revenues (except external project loans and grants) in excess of budget allocations (MEFP ¶13).

   
 

(iii) Parliament has adopted a revised VAT law consistent with the MEFP (MEFP ¶9, ¶10).

   

2.

The NBRM Council has reversed the decision that authorized the NBRM's guaranteeing or pledging of assets in support of activities performed by the private sector, public enterprises, or public funds (MEFP ¶19).

B. Structural Performance Criterion

1.

Raise electricity prices per kilowatt-hour by 7 percent in each category of household electricity consumption (MEFP ¶9).

 

July 1, 2003

C. Structural Benchmarks

1.

Amend the Law on Budgets and the Law on Public Procurement to expand budget authorization and payment functions of the treasury system in the Ministry of Finance to ensure proper monitoring and control over line ministries' expenditure commitments and payments arrears effective September 2003 (MEFP ¶13).

 

By end-May, 2003

       

2.

Improve labor market flexibility (MEFP ¶21) by:

 

By end-May, 2003

       
 

(i) amending the Law on Employment and Unemployment Insurance to limit the duration of unemployment benefits to a scale rising to a maximum of 14 months for the unemployed with more than 15 years of service, and

   
       
 

(ii) amending the Law on Labor Relations to reduce the legally required severance pay to one month for every three years of service, from one month for every two years.

   
       

3.

Initiate an external audit of the financial position and procurement procedures of the Health Fund, with terms of reference approved by the World Bank (MEFP ¶14).

 

By end-June, 2003

       

4.

Publish the external audit of the NBRM's 2002 statements (MEFP ¶29).

 

By end-July, 2003

       

5.

Enact a 2004 budget consistent with the general government deficit (fiscal balance excluding foreign-financed projects) of 1/ percent of GDP (MEFP ¶7).

 

By end-December, 2003


Technical Memorandum of Understanding

This memorandum defines the variables subject to the quantitative targets (performance criteria and indicative benchmarks), established in the Memorandum of Economic and Financial Policies (MEFP) and describes the methods to be used in assessing the program performance with respect to these targets.

A. Definition of the General Government

1. For the purpose of this TMU, the term "general government" covers: central government (including Agency for Stock Reserves and courts), Agricultural Fund, Employment Fund, Health Insurance Fund, Pension Insurance Fund, Road Fund, Bank Restructuring Agency (BRA), Privatization Agency and other funds, agencies and institutions that are currently treated by the Ministry of Finance as part of government and which correspond to the classification followed by the National Bank of the Republic of Macedonia (NBRM) in their monthly submissions to the Fund of balance sheets of the central bank and the consolidated accounts of the commercial banks. The authorities will inform the Fund staff of any new funds, or other special budgetary and extrabudgetary programs that may be created during the program period to carry out operations of a fiscal nature as defined in the IMF's Manual on Government Financial Statistics, and will ensure that these will be incorporated within the definition of consolidated general government.

B. Net International Reserves of the NBRM

2. Net international reserves (NIR) of the NBRM are defined as the difference between NBRM's reserve assets and its reserve liabilities.

3. Reserve assets are defined as liquid and usable foreign convertible currency claims on nonresidents plus monetary gold. Alongside monetary gold, reserve assets of NBRM include SDRs, foreign currency cash, securities, deposits abroad, and the reserve position at the Fund. Excluded from reserve assets are any assets that are frozen, pledged, used as collateral, or otherwise encumbered, claims in foreign exchange arising from transactions in derivative assets (futures, forwards, swaps, and options), and precious metals other than gold.

4. Reserve liabilities are defined as all foreign exchange liabilities of the NBRM to nonresidents and residents, including all credit outstanding from the Fund, arrears on principal or interest payments to commercial banks, suppliers, or official export credit agencies, and future and contingent commitments to sell foreign exchange arising from transactions in derivative assets (futures, forwards, swaps, and options). General government's foreign exchange deposits at the NBRM are excluded from reserve liabilities.

5. At end-December 2002, reserve assets so defined stood at US$734.6 million; reserve liabilities so defined stood at US$80.8 million (including US$11.3 million in foreign exchange liabilities to residents); and NIR so defined stood at US$653.9 million. General government's foreign exchange deposits at the NBRM stood at US$134 million (Table 1).

6. Quarterly floors (NIR floors) have been established for the cumulative changes in the NIR of the NBRM from the level at end-December 2002 (see Table 1 of the MEFP). The changes in the NIR will be measured in U.S. dollars excluding valuation effects calculated according to the methodology described in Section J.

Adjustors

7. The NIR floors are set based on the assumption that the balance of payments financing will amount on a cumulative basis, from end-December 2002 to:

End-March 2003 US$ -6.4 million
End-June 2003 US$ 79.5 million
End-September 2003 US$ 77.4 million
End-December 2003 US$124.8 million.

The balance of payments financing is defined as gross disbursement of foreign loans or grants to the general government or the NBRM for balance of payments support minus payments, to the creditors with whom bilateral agreements are yet to be signed, of debt service due and technical arrears on the deferred April 1999-March 2000 maturities. Excluded from this definition are the project loans and grants, and purchases from the IMF (Table 2).

8. If balance of payments financing exceeds (falls short of) the baseline assumed in ¶7, the NIR floors of the NBRM will be adjusted upward (downward) to the same extent, with the proviso that the downward adjustment to the target will not exceed the equivalent of US$40 million on a cumulative basis.

9. The NIR floors will be adjusted downward by the amount of any prepayment of external debt and will be adjusted upward for any privatization proceeds or lump-sum proceeds from concession fees in foreign currency, and restitution of foreign assets of the former SFRY as a result of succession proceedings.

10. The NIR floors will be adjusted upward and to the same extent, if general government's foreign exchange deposits at the NBRM exceed their end-2002 level for reasons other than the balance of payments disbursements (see ¶7). In addition, the NIR floors will be adjusted upward and to the same extent, if the cumulative decline in frozen, encumbered and pledged assets of the NBRM exceeds the following baseline:

End-March 2003 US$ 2.0 million
End-June 2003 US$ 4.0 million
End-September 2003 US$ 9.0 million
End-December 2003 US$12.0 million.

C. Net Domestic Assets of the NBRM

11. Net domestic assets (NDA) of the NBRM are defined as reserve money minus the net foreign assets (NFA) of the NBRM.

12. Reserve money is defined as currency in circulation (outside banks), vault cash of banks, and required and excess reserve deposits of banks held at the NBRM.

13. Net foreign assets (NFA) of the NBRM are defined as reserve assets plus those foreign assets of the NBRM that are excluded from reserve assets under the definition in ¶3 of this TMU, minus foreign exchange liabilities of the NBRM to nonresidents.

14. At end-December 2002, reserve money so defined stood at denar 18,175 million; NFA so defined stood at US$714.4 million or denar 43,303 million (converted using the stock-flow valuation methodology described in Section J); and NDA so defined stood at denar -25,128 million.

15. Quarterly ceilings (ceilings for NDA) have been established for the cumulative changes in the NDA of the NBRM from the level at end-December 2002 (see Table 1 of the MEFP).

Adjustors

16. If balance of payments financing exceeds (falls short of) the programmed levels shown above (in ¶7), the ceilings for NDA of the NBRM will be adjusted downward (upward) to the same extent, with the proviso that the upward adjustment will not exceed the denar equivalent of US$40 million on a cumulative basis.

17. The ceilings for NDA of the NBRM will be adjusted upward by the amount of any prepayment of external debt and will be adjusted downward for any privatization proceeds or lump sum proceeds from concession fees in domestic and foreign currency, and restitution of foreign assets of the former SFRY as a result of succession proceedings, and exceptional (i.e., exceeding denar 700 million in January-December 2003) dividend receipts from Macedonian Telecom. Proceeds from the sale of government flats will be excluded from this adjustment.

D. Net Domestic Assets of the Banking System

18. Net domestic assets (NDA) of the banking system, which includes the NBRM and the deposit money banks, are defined as broad money (M3) minus the net foreign assets (NFA) of the banking system.

19. Broad money (M3) includes currency in circulation, demand deposits, quasi-deposits, and non-monetary deposits (time deposits over 12 months and restricted deposits) of the non-government, and government deposits held at domestic money banks. Quasi and non-monetary deposits include deposits denominated in denar and in foreign currency.

20. NFA of the banking system are defined as the banking system's foreign assets minus foreign liabilities.

21. At end-December 2002, broad money so defined stood at denar 72,830 million; NFA of the banking system so defined stood at denar 63,374 million; and NDA of the banking system so defined stood at denar 9,456 million.

22. Quarterly indicative ceilings have been established for the cumulative changes in the NDA of the banking system from the level at end-December 2002 (see Table 1 of the MEFP).

Adjustors

23. The ceilings on the NDA of the banking system will be subject to the same adjustors as the ceilings on the NDA of the NBRM.

E. Net Domestic Credit to the General Government

24. Net domestic credit to the general government is defined as credit in denar and foreign currency to general government from the NBRM and deposit money banks minus total general government deposits in denar and foreign currency with the NBRM and deposit money banks. For the purpose of this program, accounts of the general government include all accounts recorded as government accounts in the monetary statistics reported by the NBRM in accordance with the definition of general government in ¶1 excluding the unclaimed portion of the payment of principal and interest on frozen foreign currency deposits.

25. At end-December 2002, the amount of outstanding credit from the NBRM to the general government in denar and foreign currency stood at denar 6,928 million; the amount of outstanding credit from deposit money banks in denar and foreign currency stood at denar 7,895 million; the amount of general government deposits held at the NBRM was equal to denar 17,552 million (including denar 1,142 million corresponding to the unclaimed portion of the payment of principal and interest on frozen foreign currency deposits); and the amount of general government deposits held at deposit money banks was equal to denar 2,457 million.

26. At end-December 2002, net domestic credit to the general government so defined stood at denar -5,186 million (including denar -1,142 million corresponding to the unclaimed portion of the payment of principal and interest on frozen foreign currency deposits). Of this net credit from deposit money banks was equal to denar 5,438 million; and net credit from the NBRM stood at denar -10,624 million.

27. Quarterly ceilings have been established for the cumulative changes in net domestic credit to the general government from the level at end-December 2002 (See Table 1 of the MEFP).

Adjustors

28. The ceilings on net domestic credit to the general government will be subject to the same adjustors as the ceilings on the NDA of the NBRM.

F. Central and General Government Fiscal Balances

29. Quarterly floors for the cumulative changes in central and general government fiscal balances will be determined and monitored from the financing side beginning end-December 2002 (see Table 1 of the MEFP). The financing flows will be measured as a sum of domestic financing, foreign financing, and privatization proceeds.

30. Domestic financing for the central government includes net credit from the domestic banking system (excluding the unclaimed portion of the repayment of frozen foreign currency deposits), net placement of securities outside the domestic banking system and other net credit from the domestic non-banking sector, and net variation in domestic arrears. Foreign financing for the central government includes disbursements of external loans and non-budgetary support grants received by the central government (i.e., balance of payments support as defined in ¶7) minus amortization due or pre-paid, and rescheduled debt service payments programmed to be paid out. Privatization proceeds for the central government include proceeds in denar and foreign currency. It is assumed that privatization proceeds for the central government will be equal zero during 2003. The central government balance in January-December 2002 was denar -13,019 million.

31. The general government fiscal balance includes, in addition to the central government fiscal balance, the financing position of the institutions included in the definition of general government in ¶1. Monitoring will also be done from the financing side and include, in particular, foreign financing resources linked to the road construction program. The general government balance in January-December 2002 was denar -13,554 million.

Adjustors

32. The floors on general government fiscal balance will be adjusted upward by any shortfalls of gross external financing to the Road Fund with respect to the following baseline:

End-March 2003 US$ 0.0 million
End-June 2003 US$ 8.3 million
End-September 2003 US$15.6 million
End-December 2003 US$24.0 million.

G. Ceilings on the Wage Bill of the Central Government

33. Quarterly indicative ceilings have been established for the cumulative wage bill from the central government budget from the level at end-December 2002 (see Table 1 of the MEFP). The wage bill ceiling includes all components of chapter 40 of the Macedonian budget classification (this component includes wages and salaries; social contributions; travel, food and vacation allowances; and other related categories in existence in the budget law of the year 2002), and any other personnel related expenses including overtime payments, bonuses, and vacation allowances. No wage bill or personnel related expenditures should be assigned to other budget categories. The wages and personnel expenses paid out of the central government budget chapter 40 during the period January-December 2002 were denar 18,339 million. A separate ceiling is also established on wages and other personnel expenses being paid out of special revenue and expenditures accounts, or the so-called 631, 785, 786, 787, and 788 accounts. Wages and personnel expenses paid out of these accounts in January-December 2002 amounted to denar 640 million.

H. External Debt

34. The limit on medium and long-term debt (see Table 1 of the MEFP) applies to the contracting or guaranteeing by any branch of general government or the NBRM of new nonconcessional external debt with an original maturity of more than one year, with sublimits on external debt with an original maturity of more than one year and up to and including five years. This performance criterion applies not only to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000 by the Executive Board of the IMF (EBS/00/128)1, but also to commitments contracted or guaranteed for which value has not been received. Excluded from this performance criterion are changes in indebtedness resulting from refinancing credits and rescheduling operations (including the deferral of interest on commercial debt), credits extended by the IMF and the BIS, and credits on concessional terms, defined as those with a grant element of 35 percent or more calculated using the OECD Commercial Interest Reference Rates (CIRRs) applicable for the program period. Debt falling within the limit shall be valued in U.S. dollars at the exchange rate prevailing at the time the contract or guarantee becomes effective.

35. The limit on short-term debt (see Table 1 of the MEFP) applies to the outstanding stock of short-term government and government-guaranteed external debt of general government and the NBRM with an original maturity of up to and including one year. The term "debt" has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000 by the Executive Board of the IMF. Excluded from this performance criterion are changes in indebtedness resulting from rescheduling operations (including the deferral of interest on commercial debt), and normal import-related credits. Debt falling within the limit shall be valued in U.S. dollars at the exchange rate prevailing at the time the contract or guarantee becomes effective. There was no official short-term debt or guarantees on outstanding short-term debt as of end-December 2002.

I. External and Domestic Payments Arrears

36. External payments arrears consist of the total past-due amounts of debt service obligations (interest and principal) on government, government-guaranteed, and the NBRM external debt, excluding arrears on external debt service obligations pending the conclusion of debt rescheduling agreements. Under the program, the nonaccumulation of external payments arrears is a continuous performance criterion. As of March 14, 2003, there were no outstanding external payment arrears as defined above.

37. Central government domestic arrears, excluding those to suppliers, are defined to include all payment delays to: (i) banks for bond payments (including for the repayment of frozen foreign currency deposits); (ii) individuals for Social Assistance Program payments; (iii) central government employees including for wages and salaries, and food and travel allowances; (iv) the Employment Fund and the Pension Fund; and (v) benefit recipients of the Child Care Program. The definition excludes the customary lag in paying wages, social assistance and child allowance payments, and transfers to the extra-budgetary funds (in the following month after they accrue). According to the definition here, and as reported to IMF staff, central government domestic arrears, excluding those to suppliers, were denar 0 million as of end-December 2002. Under the program, the outstanding stock of domestic arrears, as defined above, will not exceed at any time the amount outstanding as of end-December 2002, except in cases where payments depend on the adoption of programs to be prepared by budget users and adopted by the government, as stipulated in the 2003 Budget Execution Law.

38. Central government domestic arrears to suppliers are defined as obligations by government entities and institutions, including but not restricted to the Agency for Under-Developed Regions, the Service for Common Government Functions, and the Ministries of Agriculture, Culture, Education, Finance, Defense, Health, and Interior to suppliers which are overdue by more than 60 days and are non-disputed. As defined here, and as reported to Fund staff, the stock of arrears to suppliers stood at denar 597 million as of end-December 2002. Under the program, the outstanding stock of domestic arrears, as defined above, will not exceed the amount outstanding as of end-December 2002.

39. Health fund arrears are defined as unpaid obligations to suppliers and health-related personnel. As defined here, and as reported to Fund staff, the aggregate stock of these arrears stood at denar 1,711 million as of end-December 2002. Under the program the outstanding stock of arrears will not exceed the amount outstanding as of end-2002.

J. Valuation

40. The stocks of assets and liabilities denominated in foreign currencies in the monetary survey will continue to be valued according to the stock/flow methodology. The stocks of assets and liabilities denominated in foreign currencies outstanding at September 30, 1996, are valued at the current exchange rate on that day. On a monthly basis, any subsequent changes in the assets and liabilities in foreign currencies to residents and non-residents will be valued at the average exchange rate prevailing in the month of the transaction. In particular, changes in the NIR of the NBRM (in denar) will be calculated by applying the average monthly denar per U.S. dollar exchange rate to the monthly dollar value of transactions (equal to the change in NIR excluding valuation effects as calculated by the Foreign Reserves Department of the NBRM). Changes in the telecom privatization account held at the NBRM (in denar) will be calculated by applying the average monthly denar per Euro exchange rate to the monthly Euro value of transactions. Gold is valued at the price fixed in the London market and was valued at US$342.75 per ounce at end-December 2002. The programmed foreign exchange flow projections assume an exchange rate of denar 58.8909 per U.S. dollar, denar 61.3761 per Euro, and cross exchange rates at the level prevailing at end-December 2002.

41. The Foreign Reserves Department of the NBRM estimates the valuation effects on the NIR of the NBRM as follows. On a daily basis all foreign currency denominated balances are converted into U.S. dollars using the middle rates from the NBRM official exchange rate list for the same day. These balances are compared to the balances in U.S. dollars at the end of the previous day calculated in the same way (i.e., using the middle rates from the NBRM official exchange rate list for that day). The change in the daily U.S. dollar denominated balances, so calculated, is compared to the recorded daily transaction flows converted in U.S. dollars using the same methodology. Any difference between the two values is attributed to valuation effects.

42. The exchange rate effects on the foreign currency denominated assets and liabilities of the commercial banks will be estimated on the basis of their currency composition, as provided by the NBRM.

K. Monitoring and Reporting Requirements

43. Performance under the program will be monitored from information provided to the IMF by the NBRM and the Ministry of Finance. All data will be monthly, unless otherwise specified, and should be submitted by the authorities to the IMF staff within 30 days of the end of each month, unless otherwise specified. In addition, data on performance at the program test dates will be submitted with a cover letter signed by an authorized official.

44. The following information will be supplied to the IMF by the Ministry of Finance: (i) fiscal table for the central government and extra-budgetary funds; (ii) monthly information on privatization receipts (including detailed description of cash payments in local and foreign currency and payments with government bonds); (iii) data on enterprises including action taken and workers registered as unemployed; (iv) information on special revenue accounts of line ministries and separately on personnel expenditures financed from these accounts; (v) information on guarantees given on new debt, and on new debt contracted by the government, government agencies, and public enterprises; (vi) information on domestic arrears, including to suppliers and distinguishing between court disputed and non-disputed arrears; (vii) data on spending on projects and repayment to pensioners (agreed under the program as uses of privatization receipts from the sale of the Telecom company), and outlays on structural reforms; (viii) data on the claimed and unclaimed portion of the repayment of frozen foreign currency deposits; and (ix) information on number of workers registered under the employment subsidy scheme.

45. The NBRM will supply: (i) balance sheets of the NBRM and the consolidated accounts of the commercial banks—both should include details of the credit and deposits position of funds and other government entities as listed in ¶1; (ii) the monetary survey; (iii) data on components of NIR of the NBRM as defined in section A, valued in U.S. dollars adjusted for valuation changes; (iv) statement from the Road Fund indicating its balances (in denar and foreign currency) at the NBRM and at the commercial banks separately; (v) the foreign exchange cashflow of the NBRM, including the level of official reserves; (vi) record of transactions in the privatization account identified by their use and valued in U.S. dollars and Euros; (vii) daily and monthly closing and average exchange rates; (viii) detailed data on exports and imports; (ix) information on all overdue payments on short-term external debt and on medium- and long-term external debt; (x) data on foreign borrowing including gross disbursements, amortization, and interest payments; (xi) information on lending by domestic money banks according to credit ratings of borrowers; (xii) data on off-balance sheet activity of domestic money banks; and (xiii) data on each domestic money banks' compliance with prudential regulations will be provided in a quarterly basis till end-2001 and in a monthly basis thereafter within 30 days of the end of the quarter/month. Monthly data on all components of balance of payments will be submitted within 2½ months of the end of each month. Data on stock of external debt will be provided on a quarterly basis, within 30 days of the end of the quarter.

April 15, 2003


1Under the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000 by the Executive Board of the IMF The definition of "debt" has been broadened with respect to the conventional definition to include, among other things, such instruments as financial leases.

Table 1. Net International Reserves of the NBRM
(In millions of U.S. dollars)
End-Dec. 2002
Net international reserves [1 - 2] 653.9       
  1. Reserve assets [1.1 - 1.2] 734.6       
    1.1. Foreign assets 783.8       
      Gold 67.9       
      Demand deposits in foreign banks 202.6       
      Time deposits in foreign banks 497.2       
      Foreign currency at the NBM 8.2       
      Foreign securities 8.0       
      Letters of credits 0.0       
      Guarantees 0.0       

    Checks 0.0       
    1.2. Frozen, encumbered, pledged assets 49.2       
      Subordinated loan (AY Bank) 5.0       
      Booked funds (formerly AY Bank) 15.5       
  Other pledged assets 28.7       
  2. Reserve liabilities [2.1 + 2.2] 80.8       
    2.1. To nonresidents 69.5       
      IMF 67.4       
      BIS 0.0       
      Other 2.1       
    2.2. To residents 1/ 11.3       
      Foreign currency deposists of banks 11.3       
      Required reserves 0.0       
      Other 0.0       
Memorandum items:
  Net foreign assets 714.4       
  Foreign currency deposits of general government 134.0       

Source: NBRM
1Foreign currency deposits of general government are excluded from reserve liabilities.


Table 2. Balance of Payments Financing Assumptions for 2003
(in millions of U.S. dollars)

Mar-03

Jun-03

Sep-03

Dec-03


Grants 0.0   40.1   0.0   8.3  
EU 0.0   10.4   0.0   8.3  
The Netherlands 0.0   17.7   0.0   0.0  
United States 0.0   12.0   0.0   0.0  
Other 0.0   0.0   0.0   0.0  
Loans 0.0   45.7   0.0   39.1  
IBRD/IDA 0.0   35.3   0.0   20.3  
EU 0.0   10.4   0.0   18.8  
Other 0.0   0.0   0.0   0.0  
Payments1 -6.4   0.0   -2.0   0.0  
Total
BOP financing assumptions for TMU (quarterly flows) -6.4   85.9   -2.0   47.4  
BOP financing assumptions for TMU (cumulative from end-December 2002) -6.4   79.5   77.4   124.8  

Source: NBRM and MOF projections
1NBRM assumption for debt service payments to France, Japan, Kuwait, and USA (deferral of April 1999–March 2000 maturities), with whom bilateral agreements are yet to be signed. Includes the repayment of technical arrears (US$4.3 million) in Q1.


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