Interview with Vice Prime Minister Zoran Stavreski for Vreme Newspaper

There will be Supplementary Budget, but not now.

There will be Supplementary Budget by the end of the summer, however there are no precise numbers on expenditure cuts yet, new Minister of Finance Zoran Stavreski said.

He disagrees with his predecessor Trajko Slaveski that there is an urgent need to cut expenditures by EUR 100 million, since July data show improvement in tax collection. According to the announcements, he will continue implementing the set fiscal policy, which includes the macroeconomic stability as top priority, but, as he says, he will be open for the proposals of the businessmen and the farmers on spending budget funds.

What are your estimates of the budget developments you encountered? What is the percentage of collected projected revenues, where do they show underperfomance, where does the regular inflow come from?

- Like in all other countries, consequences from the crisis are felt on the revenue side in Macedonia too, but the situation gradually stabilizes. In the course of July there were signs of revenue stabilization. We expect, during this year, for a need to arise to adjust the budget to the developments in the real economy, both in Macedonia and globally. There will be a need for Supplementary Budget, however, such need is not urgent.

So, you claim that there is no need to urgently cut the expenditures, and Supplementary Budget can wait? Your predecessor Slaveski said the Budget urgently needed EUR 100 million.

- Supplementary Budget should be made by the end of the summer. However, the size of it will depend on the revenue performance in July and August. According to the information I have received from the Public Revenue Office and the Customs Administration, improvement or revenues is expected. This does not mean that revenues will rapidly increase in relation to the before, however there is an upward trend. Supplementary Budgets are common. It is common in every country, even several times a year. There were Supplementary Budgets in Macedonia in the years showing good economic performance, and now, in the year facing the global economic crisis, it is logical to have Supplementary Budget and it should not be perceived as bugbear or rumor.

For the time being there is no pressure on the Denar since EUR 175 million from the Eurobond are on the treasury account with the National Bank and can be used to increase the foreign currency reserves level and for budget purposes. Is the present “relaxed” condition with the Budget and the foreign currency reserves going to last only during the summer or for a longer period of time?

- It is true that funds form the Eurobond will strengthen foreign currency reserves, which are EUR 1.35 billion at the moment. Our goal is to cover current expenditures with national tax revenues, as well as revenues from other sources, and not to use the funds from the Eurobond to cover the current expenditures as long as it is possible. Funds from the Eurobond should be used to increase the level of foreign currency reserves so as to provide safety and stability of the Denar exchange rate. By bringing EUR 175 million externally, we can take the liberties for lower domestic borrowing through bonds. This, on the other hand, is a good thing since we will not withdraw the funds available for the private sector. Meaning that more funds from the banks will be available to the private sector.

Are you still on the stand that Macedonia does not need an arrangement with the IMF?

- Less countries in Europe have concluded an arrangement with the IMF, while many countries throughout the world do not have an arrangement. Our estimates are, for the time being, that Macedonia can successfully manage the crisis without any direct financial support by the IMF. As I have said, for the time being. If, during the year, developments are such to require revision of this position, we, as an IMF member, always have the right to ask for financial arrangement. At the end of September or the beginning of October, we expect for the IMF Board to adopt decision on availability of US$ 77 million, funds which, as an IMF member, we have the right to use without any formal arrangement, as withdrawals from our quota.

Do you think that new concept of distribution of budget funds is necessary besides the Supplementary Budget?

- We invest an increased amount of funds in productive expenditures – road infrastructure and energy. This year, we have increased capital expenditures for road construction, for infrastructure projects. In addition, we have increased the amount of funds in the energy sector, where the state participates. This year we will commence the revitalization of thermal power plant REK Bitola and modernization of hydro power plants. MEPSO will carry out reconstruction activities for the distribution network and, if we find a partner for construction of gas power plant, we will participate as a state with respective contribution in this project as well. Thus, we have no different positions on this issue with the experts who think that infrastructure is an important segment to support the national economy and for the development of the competitiveness of the economy. The macroeconomic stability above all. The Government should always be open to communicate with the private sector, with the farmers and with everyone giving proposals on how budget funds should be spent. Responsibility of the economic team of the Government is to distribute budget funds in the most prudent and most cost-effective manner so as to gain maximum effects with the available resources. Our estimate is that the intervention in the amount of EUR 100 million credit from the European Investment Bank provides for achieving the effects in the sector of small- and medium-sized enterprises and in the agriculture in the most efficient manner. However, we should underline that priority of the fiscal policy is, in addition to the development, to ensure macroeconomic stability in such times of crisis.