Skopje, 3 April 1998

Press release of the NBRM

On 02.04.1998, the Council of the National Bank of the Republic of Macedonia held its LXIV session, at which various issues from the monetary, Foreign exchange and control function of the National Bank of the Republic of Macedonia were discussed.

The members of the Council of the National Bank of the Republic of Macedonia considered and adopted the Annual Report for 1997. A conclusion was made that the monetary policy has completely accomplished its ultimate target - maintaining the price stability, having 4,5% annual inflation in 1997. Simultaneously, 1997 witnessed 1,5% GDP growth, and after the July devaluation of the Denar, a stable denar exchange rate against the Deutsche Mark has been maintained.

In the first half of 1997 the monetary policy was conducted in different circumstances than anticipated, especially in the external trade operations where high deficit in the trade balance was recorded, which resulted in a lack of foreign exchange on the foreign exchange market. Maintaining the stability of the exchange rate in such conditions led to a more restrictive monetary policy and loss of foreign exchange reserves. These developments were the reason for the denar exchange rate correction against the Deutsche Mark from 27 to 31 Denar for one Deutsche Mark.

As a result of the devaluation, in the second half of 1997 competitiveness towards abroad increased, money supply growth accelerated, liquidity of the economy improved and the level of foreign exchange reserves increased. Thus, in 1997 money supply M1 accomplished 15,2% growth, whereas banks' credits increased by 18%. In that way enough funds for normal reproduction process were provided, without any possibility for inducing pro-inflationary movements. At the same period, the National Bank of the Republic of Macedonia purchased excess USD 44 million on the foreign exchange market. Simultaneously, obligations towards abroad were serviced on regular basis, and the Republic of Macedonia ended 1997 with an external debt in the amount of USD 1,1 billion. That means that the Republic of Macedonia enters the group of low-middle indebted countries. In 1997, the deficit in the current account of the balance of payments amounted to USD 276 million.

The Council considered and adopted the Report on conducted controls and undertaken measures by the National Bank during 1997. The Report presents the control functions of the National Bank of the Republic of Macedonia, as well as the structure and quality of the banking system in the Republic of Macedonia. It was stated that the average capital adequacy rate in the banking system of the Republic of Macedonia is 27,3%, which is 19,3 percentage points above the legally determined 8%. During 1997, the National Bank undertook corrective measures against 21 savings houses and 9 banks, out of which 5 savings houses and 9 banks were still undergoing corrective measures at the end of 1997. Due to detected non-compliance with the legal regulations, in 1997 operating licenses were revoked from 8 savings houses. In 1997, banks in the Republic of Macedonia realized net profit in the amount of Denar 1,1 billion.

Having in mind the accomplished current real and monetary movements, as well as the monetary policy projection, the Council of the National Bank of the Republic of Macedonia took a decision regarding the possibility for increasing denar placements of banks and savings houses in the second quarter of 1998 by Denar 708 million, or 4,7% compared to 28.02.1998. In order to ensure more efficient operation of savings houses, the Council took a decision for increment of the savings deposits that they may collect from 1 to 1,5 times more than the amount of the founding capital.

Finally, the Council decided that each foreign exchange bureau licensed by the National Bank of the Republic of Macedonia, shall receive a special label which will have to be displayed in the foreign exchange bureau. In that manner, citizens will know which foreign exchange bureaus are registered and are operating in compliance with the legal regulations.

National Bank of the Republic of Macedonia Council