Considerations on COM(2023)74 - Providing macro-financial assistance to North Macedonia - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)74 - Providing macro-financial assistance to North Macedonia. |
|---|---|
| document | COM(2023)74  |
| date | July 12, 2023 |
(2) The economy of North Macedonia has been significantly affected by the 2020 recession caused by the COVID-19 pandemic, as well as by the recent energy crisis. The situation contributed to the country’s sizeable financing gap, deteriorating external position, and growing fiscal needs.
(3) The government of North Macedonia has demonstrated a strong commitment to further reforms, focusing on the key policy areas identified in the Joint Ministerial Conclusions of May 2022 and including areas of the fundamentals such as the judiciary, the fight against corruption and organised crime, good governance and the rule of law.
(4) North Macedonia has successfully completed the COVID-19 macro-financial assistance operation 6 , because all the reform actions agreed with the Union in the Memorandum of Understanding have been carried out.
(5) The government and the IMF reached staff-level agreement (in April 2022) on a 24-month precautionary and liquidity line (PLL) for up to EUR 530 million, which was officially approved by the IMF Executive Board on 22 November 2022. The IMF programme aims to mitigate the worsening external situation, support fiscal consolidation and accelerate structural reforms in a number of areas, including tax policy and public investment.
(6) In view of the worsening economic situation and outlook, North Macedonia first requested complementary macro-financial assistance from the Union in April 2022. The Commission put the request on hold, however, because the economy of North Macedonia was still proving quite resilient at that time and there were some other financing options available to meet 2022 external financing needs. The government of North Macedonia renewed its request for macro-financial assistance in October 2022.
(7) Given that North Macedonia is an EU candidate country, which started the accession negotiations process in July 2022, the country is considered eligible to receive macro-financial assistance from the Union.
(8) The Union’s macro-financial assistance should be an exceptional financial instrument of untied and undesignated balance-of-payments support, which aims at addressing the beneficiary’s immediate external financing needs and should underpin the implementation of a policy programme containing strong immediate adjustment and structural reform measures designed to improve the balance-of-payments position in the short term.
(9) Given that there are still significant residual external financing needs in the country’s balance of payments, beyond the needs met by the resources provided by the IMF, the macro-financial assistance to be provided to North Macedonia is, in the current exceptional circumstances, considered to be an appropriate response to the country's request for support in stabilising its economy, in conjunction with the IMF programme. The Union's macro-financial assistance would support the economic stabilisation and the structural reform agenda of North Macedonia, supplementing resources made available under the IMF's financial arrangement.
(10) The Union's macro-financial assistance should aim to support the restoration of a sustainable external financing situation for North Macedonia thereby supporting its economic and social development.
(11) The Union’s macro-financial assistance is expected to go hand-in-hand with the implementation of disbursements of budget support operations under the Instrument for Pre-Accession.
(12) The determination of the amount of the Union's macro-financial assistance is based on a quantitative assessment of the residual external financing needs of North Macedonia and takes into account its capacity to finance itself with its own resources, in particular the international reserves at its disposal. The Union's macro-financial assistance should complement the programmes and resources provided by the IMF and the World Bank. The determination of the amount of the assistance also takes into account expected financial contributions from multilateral donors and the need to ensure fair burden sharing between the Union and other donors, as well as the pre-existing deployment of the Union's other external financing instruments in North Macedonia and the added value of the overall Union involvement.
(13) The Commission should ensure that the Union's macro-financial assistance is legally and substantially in line with the key principles, objectives and measures taken within the different areas of external action and other relevant Union policies.
(14) The Union's macro-financial assistance should support the Union's external policy towards North Macedonia. The Commission and the High Representative should work closely together throughout the macro-financial assistance operation in order to coordinate and ensure the consistency of the Union’s external policy.
(15) The Union's macro-financial assistance should support the commitment of North Macedonia to values shared with the Union, including democracy, the rule of law, good governance, respect for human rights, sustainable development and poverty reduction, as well as its commitment to the principles of open, rules-based and fair trade.
(16) A pre-condition for granting the Union's macro-financial assistance should be that North Macedonia respects effective democratic mechanisms – including a multi-party parliamentary system – and the rule of law, and guarantees respect for human rights. In addition, the specific objectives of the Union's macro-financial assistance should strengthen the efficiency, transparency and accountability of the public finance management systems, the governance and supervision of the financial sector and promote structural reforms aimed at supporting sustainable and inclusive growth, decent employment creation and fiscal consolidation. Both the fulfilment of the preconditions and the achievement of those objectives should be regularly monitored by the Commission.
(17) In order to ensure that the Union’s financial interests linked to the Union’s macro-financial assistance are protected efficiently, North Macedonia should take appropriate measures relating to the prevention of, and fight against, fraud, corruption and any other irregularities linked to the assistance. In addition, provision should be made for the Commission to carry out checks and for the Court of Auditors to carry out audits.
(18) Release of the Union's macro-financial assistance is without prejudice to the powers of the European Parliament and the Council as budgetary authority.
(19) The amounts of the provision required for macro-financial assistance in the form of loans should be consistent with the budgetary appropriations provided for in the multiannual financial framework.
(20) The Union's macro-financial assistance should be managed by the Commission. In order to ensure that the European Parliament and the Council are able to follow the implementation of this Decision, the Commission should regularly inform them of developments relating to the assistance and provide them with relevant documents.
(21) In order to ensure uniform conditions for the implementation of this Decision, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council 7 .
(22) The Union's macro-financial assistance should be subject to economic policy conditions, to be laid down in a Memorandum of Understanding. In order to ensure uniform conditions of implementation and for reasons of efficiency, the Commission should be empowered to negotiate such conditions with the authorities of North Macedonia under the supervision of the committee of representatives of the Member States in accordance with Regulation (EU) No 182/2011. Under that Regulation, the advisory procedure should, as a general rule, apply in all cases other than as provided for in that Regulation. Considering the potentially important impact of assistance of more than EUR 90 million, it is appropriate that the examination procedure be used for operations above that threshold. Considering the amount of the Union's macro-financial assistance to North Macedonia, the examination procedure should apply to the adoption of the Memorandum of Understanding, and to any reduction, suspension or cancellation of the assistance,
(23) Given the limited amount of the financial assistance (EUR 100 million), its one-off nature, and the desired time frame of the disbursement, the back-to-back funding approach would ensure more flexibility and efficiency of the borrowing operations compared to the diversified funding strategy. Therefore, as a way of exception the Commission should fund the loan instalments in the capital market back-to-back and not by using its diversified funding strategy provided for in Article 220a of the Financial Regulation. It is therefore appropriate to fund the financial assistance through individual financial transactions.