News 12 Nov 12

Macedonian Budget Draws Opposition Fire

The opposition has accused the Macedonian government of unjustified spending and driving the country into debt with its controversial draft budget.

Sinisa Jakov Marusic

Macedonian government building

“The budget again envisages spending of money on non-crucial projects,” said Vanco Uzunov, head of the Opposition Social Democrats’ economic board, citing the Skopje 2014 revamp of the capital.

“The government intends to indebt us further, a policy which leads towards bankruptcy similar to the Greek scenario.”
Finance Minister, Zoran Stavreski submitted the draft budget to parliament last week. It plans to spend 2.7 billion euro in 2013, while the revenues are estimated at 2.4 billion euro. It intends to plug the gap through loans.
The government insists that the 2013 budget is “realistic” and designed to combat economic hardship amid European crisis. Economic growth this year in Macedonia is forecast to be zero and next year between zero and an optimistic two per cent.
The government plans to spend some 380 million euro, about 10 per cent more than in 2012, on capital investments, including roads and railroads, hospitals, sewage. It will also continue with the Skopje 2014 revamp.

“If there is one thing we took care of, it was increasing money for capital investments that will provide job for the local firms” said Prime Minister Nikola Gruevski.
The government says the increase in state spending on what they insist are genuine capital investments will help to keep the economy going.

The government already secured loans for construction of the last motorway stretch of the south-north corridor and for the construction of one part of its planned railway towards Bulgaria.

The budget deficit is projected at some 300 million euro, or 3.5 per cent of GDP.

The government plans to fill this gap through loans from abroad worth 250 million euro. A government bond issue is expected to cover the rest.

Government debt has risen sharply this year when Macedonia took out or agreed to take out almost 700 million euro in loans from foreign banks and financial institutions.

In April, the World Bank offered Macedonia $100 million [75 million euro] to pursue economic reforms and address health, education and social welfare issues. Earlier that month the country took a loan of 250 million euro from Deutsche Bank to fill the budget gap.

In November 2011, Macedonia borrowed 130 million euro from Deutsche Bank and Citibank with a guarantee from the World Bank. In March 2011, it drew 220 million euro from its IMF precautionary credit line.

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