IMF Executive Board Approves €475.6 million Arrangement for Macedonia Under the Precautionary Credit Line

Press Release No. 11/14
January 19, 2011

The Executive Board of the International Monetary Fund (IMF) today approved a two-year arrangement for the Former Yugoslav Republic of Macedonia under the Precautionary Credit Line (PCL) in the amount equivalent to SDR 413.4 million (about €475.6 million, 600 percent of quota). The access under the arrangement in the first year will be equivalent to SDR 344.5 million (about €396.4 million, 500 percent of quota), rising in the second year to cumulatively SDR 413.4 million).

The arrangement for Macedonia is the first commitment under the PCL. The PCL was established in 2010 in the context of expanding and enhancing the IMF’s lending tools to help provide effective crisis prevention.

Following the Executive Board’s discussion on Macedonia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“Macedonia’s track record of sound economic policies has contributed to a solid macroeconomic performance that includes low public debt and inflation, and a resilient banking system. Such strong fundamentals have cushioned the impact of the global crisis on the Macedonian economy.

“The authorities are committed to maintaining sound economic policies. One pillar of their policy framework is moderate fiscal deficits, which will help preserve a sustainable fiscal position and safeguard investor confidence. A second pillar is the ongoing commitment to support the exchange rate peg, including with a monetary stance that maintains an adequate level of international reserves. Based on these commitments, prospects for preserving macroeconomic stability and returning to more robust economic growth appear good.

“Despite the broadly favorable outlook for growth and macroeconomic stability, vulnerabilities to spillovers from economic and financial volatility in the region remain. The PCL will mitigate the risk of contagion, including by signaling sound policies. In light of Macedonia’s strong fundamentals, the absence of balance of payments pressures at present, and the generally positive economic prospects, Macedonia is not expected to draw upon the resources available under the PCL. Nevertheless, the availability of these resources, if needed, will provide important insurance against the possibility of adverse external developments.”

The PCL is an instrument established last year that is available to Fund members with sound economic fundamentals and policies that do not have actual financing needs but face risks that could give rise to such needs (see Press Release No. 10/321). Thus, countries with PCL arrangements would be expected not to draw upon the available funds unless there is a deterioration in external conditions. The PCL arrangement provides countries with confidence that in the event of adverse developments they have a deep reservoir to draw upon to preserve stability. Moreover, having a PCL arrangement in place should help to strengthen confidence and facilitate better access to private capital markets.



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