The National Bank of the Republic of Macedonia Council held its IV session today and discussed several issues.
Skopje, 25 March 2010
Press release of the NBRM
The National Bank of the Republic of Macedonia Council held its IV session today and discussed several issues.
The Council discussed the Monthly Report 02/2010. The Report indicates that the dynamics of the major macroeconomic indicators is mostly consistent with the NBRM projections. Such perception primarily arises from the continuation of the positive developments on the foreign exchange market and the dynamics of foreign reserves. Since the beginning of the year, the foreign reserves has increased, although insignificantly. The positive developments on the foreign exchange market and of the foreign reserves are consistent with the updates on the foreign trade (annual decrease of 39.2% in the trade deficit in January) and the cash exchange market. These segments, in fact, show import demand lower than projected and improved private transfer performances. Accordingly, the trends in the external sector relatively improved compared to the projections, ensuring more favorable conditions for conducting monetary policy. Therefore, the NBRM made a decision to reduce the CB bills interest rate by 1 percentage point, from 7.5% to 6.5%. This also entails reduction of the interest rate of overnight credits (Lombard Credits) from 9% to 8%.
However, notwithstanding the improved performances compared to the perceptions, and consequently, the enhanced capacity of the monetary policy to abate the potential unfavorable shocks, the risks surrounding the future developments in the external sector are still present. The present uncertainty clouding the sustainability of the current recovery of the global economy also creates uncertainty about the expected exports recovery and the magnitude of capital inflows into the domestic economy. On the other hand, there are also risks surrounding the perceptions for moderate recovery of the domestic demand, which along with the potentially poorer exports, could bring about lower import demand. Hence, the future external sector outlook, although generally improved, is still accompanied by risks and creates a need for further prudential monitoring of the developments.
The council discussed and adopted the Foreign Reserves Management Report for 2009. In 2009, the foreign reserves were managed amidst growing financial crisis, lower liquidity and solvency of the financial institutions worldwide and lower returns on the international markets. Additional challenge in the foreign reserves management are the developments on the domestic foreign exchange market, which in the first half of the year imposed the need for National Bank interventions for sale of foreign currencies, for the purposes of maintaining the Denar exchange rate stability.
Under such circumstances, the National Bank, in the process of foreign reserves management, kept its investments in high-quality government securities, ensuring optimal balance between the safety and liquidity of investments. The safety was provided by investing the foreign reserves in government-issued securities with highest credit ratings and by prudential macroeconomic policies. Foreign reserves liquidity was ensured by investing in securities which are highly demanded on the secondary markets, enabling their prompt conversion into most liquid assets.
The results of the investments in foreign reserves were under the influence of the developments of the returns on financial instruments on the European and US markets, which in 2009 reached the historically lowest level. In such environment, the National Bank registered respective earnings performance, with the rates of return on investment portfolios being relatively higher compared to the results of the reference market indices. Foreign reserves investment income generated in 2009 totaled Euro 23.7 million.
The Council, at its today's session, adopted the Internal Audit Report for 2009. Sixteen audits, in total, were conducted in this period, fifteen of which regular and one extraordinary, within the technical cooperation with experts from the De Nederlandsche Bank, and the scheduled activities of monitoring the given recommendations. The Council ascertained that in 2009, the Plan of Internal Audit Activities was fully implemented.
The Council also adopted the NBRM Risk Management Policy. The adoption of the NBRM Risk Management Policy resulted from the need of improving the efficiency and effectiveness of the risk management process, by applying the best practices. This policy introduces an integrated risk management framework - an internationally accepted model also known as COSO ERM (Committee of Sponsoring Organizations of the Treadway Commission - COSO, Enterprise Risk Management - Integrated Framework). The application of this model defines the primary objectives and components of the risk management process, including the method of risks identification, assessment, management and control, in order to avoid and mitigate their adverse effect on the achievement of the NBRM strategy and objectives.
Governor's Office