Skopje, 18 April 2001

Press release of the NBRM

On April 18, 2001, the Council of the National Bank of the Republic of Macedonia held its LXXXVIIth session and adopted the Annual Report of the National Bank of the Republic of Macedonia for the year 2000, the Report on Supervisory and Control Activities of the National Bank of the Republic of Macedonia in 2000, the Report on Management of the Foreign Exchange Reserves of the Republic of Macedonia in 2000 and the Report on Internal Audit for 2000. Thus, the members of the Council concluded that the Central Bank fulfilled its obligation defined in the Republic of Macedonia Constitution and the National Bank of the Republic of Macedonia Act which is to preserve the price stability, i.e. the exchange rate. The inflation rate in 2000, measured through the costs of living index, on December base equaled 6.1% annually. The Denar exchange rate, as a nominal anchor in the economy, remained stable, which once again confirmed the empirically determined fact that the preservation of stable exchange rate of the national currency in a small and open economy is of exceptional importance for the price stability.

In 2000, the National Bank of the Republic of Macedonia purchased net amount of USD 190 million on the foreign exchange market. Consequently, the NBRM foreign exchange reserves increased by USD 235 million, thus reaching USD 714 million at the end of 2000, which is an equivalent of 4.1 monthly import of goods.

By abolishing the credit ceilings of the banks’ Denar placements in 2000, the NBRM made a complete transit towards indirect market-oriented monetary regulation instruments. At the end of 2000 compared to the respective period of 1999, the banks’ Denar placements were by 27.8% higher. The total liquidity of the banking system in 2000 was permanently preserved at high level, while in December in condition of decrease in the liquid assets demand, the level of interest rate on the Money Market was reduced to 7.1%, which is by 4.5 percentage points lower compared to the end of 1999.

Once again the Council emphasized the exceptional significance of the conclusion of the arrangement with the International Monetary Fund and the World Bank in 2000, so-called PRGF/EFF arrangement for closing the financial gap in the balance of payment, as well as the overall credibility of the country in the world.

In addition, in 2000, the reforms of the payment system of the Republic of Macedonia were intensified, and are expected to be completed in 2001, when a total transfer towards the RTGS system (Real Time Gross Settlement) will be made. It is expected to enable more efficient and easier liquidity management by the banks and development of standard financial infrastructure, accepted in the world.

The council reviewed and adopted the Report on Supervisory and Control Activities of the National Bank of the Republic of Macedonia in 2000, and it was concluded that in 2000 there was a continuation in the reform activities in the Macedonian banking system and its institutional framework, directed towards development of sound and efficient banking system which should ensure stable and sustainable development of the Macedonian economy. In that light, the adoption of the new Banking Law should be underlined, which led to further compliance of the legal framework with the European union Directives in the banking area an the so-called 25 Core Principles for Effective Banking Supervision.

The Report indicates that at the end of 2000, the degree of privatization of the banking capital in the Republic of Macedonia equaled 83.5%, which is by 6.7 percentage points higher compared to December 31, 1999. If the banking institution “Macedonian Bank for Support of the Development”, which is entirely state owned, is excluded from the analysis, the degree of privatization of the remaining banking capital in the Republic of Macedonia equals 87.8%, or by 5.5 percentage points more relative to December 31, 1999. Analyzing by banks, the degree of privatization ranges from 61.5% to 100% in 6 banks.

In 2000, the total foreign capital investments in the banks in the Republic of Macedonia equaled DEM 216.7 million, where the percentage of share of foreign capital in the total banking capital increased from 19.3% (as of December 31, 1999) to 40.8% at the end of December 2000. The bank-by-bank-analysis indicates that foreign capital has been invested in 16 bank, with a share ranging from 0.3% to 100%.

Council of the National Bank of the Republic of Macedonia