Stronger PFM recommended for Macedonia

4 Sep 15

The International Monetary Fund has urged Macedonia to strengthen its public financial management system, warning that the country needed to rebuild its policy buffers to ensure macroeconomic stability.

Economic growth is expected to slow this year to 3.2% thanks to prolonged political disagreement and the impact of the Greek crisis, the IMF said. Last year growth accelerated to 3.8%, from 2.7% in 2013.

The IMF praised the country’s efforts in supporting improved public investment, credit conditions, exports and foreign direct investment, but cautioned that downside risks would weaken Macedonia’s economic growth outlook.

The fund also noted that the under-performance of VAT and non-tax revenues combined with wage increases for the police force and additional capital expenditures caused by the worsened security situation would result in a deficit of around 4% of gross domestic product in 2015, compared to 3.4% targeted in the budget.

“Against this background, directors encouraged the authorities to strengthen fiscal policy performance and enhance policy buffers, while promoting greater private-sector-led job growth,” the IMF said in a review of Macedonia’s economic performance.

“They recommended that the planned debt ceiling of 60% of GDP should be complemented by a lower operational threshold or debt brake to create adequate space for fiscal policy to counter macroeconomic and demographic shocks.

“Directors also encouraged greater efforts to strengthen public finance management, improve revenue efficiency, and rationalise expenditures.”

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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