Skopje, 23 March 2000

Press release of the NBRM

On March 23, 2000, the Council of the National Bank of the Republic of Macedonia held its LXXIXth session, adopting the 1999 Annual Report of the National Bank of the Republic of Macedonia. The Council members concluded that although 1999 was very unusual year due to the events in the region, the Central Bank fulfilled entirely its goal defined by the Law i.e. the Central Bank maintained the price stability as well as the stability of the exchange rate. Hence, the realized inflation rate measured through the growth of the retail prices in 1999 was low and stable and equaled 2.3%, on annual level. The exchange rate of the Denar remained stable in spite of the periodical minor turbulence in the course of the year. The monetary aggregates registered a relatively higher growth in comparison to the projected one, primarily due to the larger foreign currency inflow on the foreign exchange market and deposits growth in the commercial banks portfolios. In the course of 1999, The National Bank of the Republic of Macedonia purchased $118 million on the exchange market. The growth of the economy was supported by the Central Bank through adequate growth of total banks credits in the non-government (private) sector, reaching a growth of 9.4%, on annual level. Since the independence, the exchange reserves have reached the highest level, and at the end of 1999 they amounted to $458 million, that represent coverage of 3.1 monthly import of goods. The total liquidity in the banking system has improved, determining a decrease in the interest rates on the money market from 24.2% to 11.2%, on annual basis.

The members of the Council of the National Bank of the Republic of Macedonia reviewed and adopted strategy and package of decisions continuing the reforms in the monetary regulation instruments. The further reforms in the  instruments for monetary regulation were determined by the improved liquidity in the banking system, the decrease of the debt of the banks on the credit auctions with the Central Bank, the strengthening of the supervisory control, as a well as the entrance of strategic foreign investors in several commercial banks.

Basic goal of the adopted reforms in the monetary regulation instruments is to help the National Bank of the Republic of Macedonia to achieve more efficient regulation of the global liquidity, more efficient regulation of the commercial banks liquidity by themselves, development of the secondary markets, development of the collateral landing, and finally, differentiation of the Central Bank interventions for fine tuning from the ones defined as "lender of last resort". The proposed reforms would cause change in the role of the Central Bank from active to less active one, in relation to the daily interventions with the liquid assets. In addition, this would enhance the trading on the money and short-term securities market, development of the collateral lending between banks, as well as market determining of interest rates.

The reform in the monetary regulation instruments of the National Bank of the Republic of Macedonia should be realized in several dynamic phases, anticipating certain changes in the characteristics of the current instruments of monetary management, establishment and implementation of electronic monitoring of the ownership transfer of securities by using the book entry system, joint work with the Ministry of Finance on the project for issuance of short-term government securities, development of the secondary securities market, regulation of the banking system liquidity through the repo operations of the short-term government securities and indirect regulation of the banks credit activities through market determination of interest rates. It should be noted that commencing from the second quarter of 2000, in compliance with the previous Central Bank announcements, the direct instrument - Denar credit ceilings shall no longer be in force.

In addition, the members on the Council passed a Decision referring to further reforms in the payment operations system, according to which the limit of the large value payments carried out through the commercial banks, reported to the National Bank of the Republic of Macedonia, was decreased from Denar 5 million to Denar 3 million. The decrease, which is dynamic and in the future should be further decreased to Denar 1 million, is due to the improvement in the planning of the commercial banks, as well as the technical readiness of the Central Bank.

The Council passed a Decision which additionally defines the documentation needed for issuance of the operation license for certain financial institution. Thus, the domestic and foreign investors should additionally submit within the Elaborate on the economic feasibility in more detail the data and analysis on the credit policy, liquidity management policy, exchange rate risk management policy, miscellaneous risk management policy, ethics policy and cash funds control policy as well as the bank founders' plan for the further development with regard to strengthening of the capital base.

The Council of the National Bank of the Republic of Macedonia disputed and expressed its opinion regarding the speculations on the possible devaluation of the Denar as well as on the pressures on the foreign exchange market. It was also concluded that the current economic movements in the Republic of Macedonia, in the first several months of 2000 do not give macroeconomic base for and do not justify such speculations. Namely, the inflation is low and stable and its increase is primarily due to the increase in prices of the agricultural products and psychological factors of the economic entities, as a result of enforcing of the value added tax, which increased the demand of certain excise products and the consumption. The monetary aggregates register relatively high growth, due to the temporary increase in the demand of foreign currency compared to the supply on the exchange market, as a result of the commenced payment of tobacco. The foreign exchange rate is within the framework of the target level and it will be defended with all the instruments available for monetary regulation.

Council of the National Bank of the Republic of Macedonia