Skopje, 10 March 1998

Press release of the NBRM

On 09.03.1998, the Council of the National Bank of the Republic of Macedonia held its LXIII session, at which various issues from the scope of operations of the National Bank were discussed. The Council especially addressed the issues from the monetary and foreign exchange sphere, analyzing the latest developments in these areas. It was stated that the monetary and foreign exchange movements from the first two months of 1998 were in accordance with the targets and tasks of the monetary and foreign exchange policy. It was also concluded that in respect of inflation, the results were better than projected. In the framework of this discussion, the Council of the National Bank of the Republic of Macedonia considered and adopted the Report on handling foreign exchange reserves during 1997.

Analyzing the current monetary policy, the Council of the National Bank of the Republic of Macedonia paid special attention to the interest rate policy of the Republic of Macedonia. Having in mind the low level of inflation and the stable denar exchange rate the Council of NBRM estimated that the average nominal lending interest rates in 1997 of 21,4% on annual level, exceed the level of profitable operations of the economic subjects and do not allow high expansion of the economic growth. Moreover, the Council estimated that the interest margins between lending and borrowing interest rates (10 percentage points) are extremely high.

In order to eliminate this situation, the Council of NBRM adopted several measures which should contribute to market reduction of interest rates. Measures are mainly directed in two domains: a) reduction of operational costs of banks, for the purpose of which the Council took a Decision for increasing the interest rate that the National Bank of the Republic of Macedonia pays to the commercial banks on the basis of funds allocate in the reserve requirement from 3,4% to 6,3% on annual level, beginning from April 1998, and b) strengthening the supervisory standards for the purpose of improving the efficient allocation of financial resources from commercial banks to creditworthy enterprises.

Apart form the undertaken measures from the domain of the National Bank of the Republic of Macedonia, the Council proposed undertaking of measures from the domain of the other carriers of economic policy and the commercial banks consisting of the following: a) review of the existing tax policy which has negative effects on saving, especially in the part of double taxation on bank receipts from interests and personal income tax from interests; b) accelerating the activities in respect of forming the credit register, aiming at creation of quality information data base regarding the level of indebtedness of separate debtors with the banking system; c) improving the efficiency in the operations of the courts in the process of solving financial disputes; d) creating internal policies, procedures and standards of banks regarding extension of credits, higher quality of managing the credit portfolio and more efficient collection of claims; e) formation of "prima rate" by the banks regarding the AAA debtors, etc.

The Council took a Decision for continuing the reforms in the payment operations and instruments of monetary regulation. Thus, beginning from April 1998, the amount of large value payments executed through the commercial banks has been decreased from Denar 10 million to Denar 5 million. Simultaneously, the Council emphasized that 1998 shall be marked with a "mini" reform regarding the instruments of monetary regulation, which would mean gradual abandonment of credit ceilings as an instrument and direction towards market instruments of monetary regulation.

National Bank of the Republic of Macedonia Council