DONORS PLEDGE SUPPORT FOR FORMER YUGOSLAV REPUBLIC OF MACEDONIA'S ECONOMIC REFORM PROGRAMME

Paris, May 5, 1999. — At the Emergency Joint G-24/Consultative Group meeting of 5 May 1999 chaired by the European Commission and the World Bank, the group of donor nations and multilateral organizations (46 members) gave their strong support to the former Yugoslav Republic of Macedonia to assist in maintaining economic stability, continue economic reforms and for handling emergency costs arising from the Kosovo crisis.

The donor meeting pledged substantial and humanitarian financial assistance to former Yugoslav Republic of Macedonia amounting to US$252 million to meet immediate needs. Additional financial assistance was also promised in the coming weeks to close an overall financing gap of over $400 million. Many donors also promised to increase humanitarian assistance. Donors agreed to meet again in the second half of 1999 to reassess the financing needs for the country, review progress made, and assess the economy's financing needs for the year 2000. The EU pledged budget support of 25 million EUROs and will prepare additional macro/financial assistance. The World Bank IDA credit of $50 million has been submitted to its Board of Directors and a $10 million Labor Redeployment Fund is under preparation. The IMF expects to conclude a Stand By Credit of US$32.6 million shortly. Substantial bilateral assistance was also pledged at the meeting.

Former Yugoslav Republic of Macedonia's Minister of Finance Mr. Boris Stojmenov referred to the extremely difficult economic situation since the Kosovo Crisis. Mr. Stojmenov stressed that former Yugoslav Republic of Macedonia is at a critical point in its political and economic transition, and that the support of the international community is essential if the Government is to succeed in its ambition of creating strong democratic institutions, a modern market economy in a relatively peaceful and politically and socially peaceful environment. He urged the donor community to make an investment for peace.

The Government had already carried out extensive price liberalization and confirmed that it was committed to macroeconomic stability and to the rapid privatization of all loss making state enterprises. The Government's programme also includes measures aimed at mitigating the social costs of reform and improving the targetting of the current social assistance program. Minister of Labour Ibrahimi emphasized that : « unless the international community helps Macedonia in overcoming the present problems, especially in the social sector, we can expect social tensions and unrest which would hurt not only the internal peace and stability in the country but also the efforts of the international community to solve the Kosovo crisis.»

The Emergency Joint G24/CG meeting reviewed the impact of the Kosovo Crisis on the former Yugoslav Republic of Macedonia and the country's ability to maintain a stable macroeconomic framework and social peace despite the crisis and appreciated its exemplary role in the region. Delegates said the Government of the former Yugoslav Republic of Macedonia deserves large international financial assistance in light of the incremental costs to its budget and the worsening balance of payments situation directly resulting from the crisis. Donors noted the fragile economic situation and urged the Government to keep the programme on track and fully implement it within the agreed timeframe and pursue intended reforms of public institutions to manage public expenditures and to provide a regulatory framework for economic development.

The meeting gave special emphasis to the impact on the private sector through higher trade, transport costs and heightened uncertainty in the region. Initiatives to help the private sector to cope with this crisis through political risk facilities, enlarged credit guarantees, improvement in investment climate were encouraged. Delegates stressed the need for more careful and coordinated monitoring of budget assistance to former Yugoslav Republic of Macedonia. They welcomed the decision to set-up monitoring mechanisms, including a special disbursement account to be set-up by the World Bank and the European Commission which has worked well in other emergency situations.

24 donor nations were represented at the Emergency Joint G-24/Consultative Group meeting, including 15 EU Member States, plus Australia, Canada, Ireland, Japan, Norway, the Russian Federation, Slovenia, Switzerland, Turkey and the US. The multilateral organisations included the IMF, the EBRD, the EIB, IFAD, UNDP, OECD, OSCE, UNHCR,UNICEF, the Council of Europe, the Swedish Investment Bank, and the International Committee of the Red Cross.

The World Bank, Mr. Ajay Chhibber, Country Director, Europe and Central Asia Region and the European Commission, Mr. Fabrizio Barbaso, Director for External Affairs, jointly chaired the meeting. The former Yugoslav Republic of Macedonia's Delegation was headed by Minister of Finance, Stojmenov and included Deputy Prime Minister Kiprijanova and Deputy Prime Minister and Minister of Social Affairs and Labour, Ibrahimi, Governor of the Central Bank, Trpeski, and Minister of Development Danevska.