Skopje, 25 October 2001

Press release of the NBRM

The Adoption of the monetary, foreign exchange and supervision activity reports of the National Bank of the Republic of Macedonia in the first half of 2001

The National Bank of the Republic of Macedonia Council held its XCI session on 25.10.2001, on which several reports and decisions from the monetary, foreign exchange and supervision domain were discussed and adopted.

The National Bank of the Republic of Macedonia adopted the Semiannual report of the Bank for the first half of 2001. It was stated that the political and security crisis in the country that started in the mid-February 2001, conditioned by the war developments in the northwest of the country, reflected unfavorably upon the macroeconomic achievements in the January - June 2001 period. Thus, in the first half of 2001, a decrease in the industrial output, decrease in the number of the persons employed, decrease in the foreign trade, decline in the public income whereas the increase in the public expenditures, etc. was registered. In such a complex circumstances for implementing the monetary and foreign exchange policy, the National Bank of the Republic of Macedonia retained the firm determination to accomplish its constitutional and legal obligation - maintenance of stable foreign exchange rate of the Denar as a nominal anchor in the economy, and hence, maintaining the price stability in the economy, as proved the foremost environment for accomplishing the economic activities. However, the average inflation rate in the January - June 2001 period retain the low one-digit level and equaled 6%. Despite the certain fluctuations of the Denar when the war developments in the country were the most intensive, the National Bank of the Republic of Macedonia succeeded to preserve the exchange rate stability of the Denar.

The dominant feature of the first half of 2001 regarding the fiscal policy, is the significant decrease in the revenue with simultaneous intensive increment of the budget expenditures. Accordingly, the coordination of monetary and fiscal policy, and the firm determination to defend the exchange rate of the Denar against the Deutsche Mark was of great significance, in order to eliminate the inflation expectations and unable the inflation spiral foreign exchange rate - prices. Regarding the financial sphere, the war crises in the Republic of Macedonia influenced on the maintenance of high level of money in circulation and withdrawal of the deposits from the banking system, mainly due to the psychological factors. Thus, the total deposits of the non-governmental sector decreased by Denar 1,822 million. There was continuing higher demand for the deposits than the supply on the foreign exchange market in this period, causing a pressure for the depreciation of the Denar against the Deutsche Mark. That is why, the National Bank of the Republic of Macedonia intervened on the foreign exchange market using net-sale of the foreign currency. In addition, the National Bank of the Republic of Macedonia intervened on the supply side of the foreign exchange market, undertaking appropriate monetary policy measures. Despite the drastic decrease in the foreign investments in the country due to the war developments, the Republic of Macedonia succeeded to service the external debt regularly.

The National Bank of the Republic of Macedonia Council adopted the Report on the supervising and control activities of the National Bank of the Republic of Macedonia in the first half of 2001. Accomplishing the supervising function in the first half of 2001, the Central Bank undertook the following activities.

Further improvement of the banking supervision legal framework;
Intense activities in accomplishing the licensing function;
Permanent off-site and on-site supervision in banks and exchange offices’ performance and consequently, undertaking corrective measures towards those institutions where noncompliance and untidiness in their performance was stated;

Activities towards improving the cooperation of the National Bank of the Republic of Macedonia with the supervising bodies from other countries.
The National Bank of the Republic of Macedonia adopted several decisions on harmonization with the new legal framework, as well.

The Governor’s Office