There will be no devaluation in September either.
If we estimate that there is a need for a formal arrangement with the IMF so as to maintain macroeconomic stability, we will not have second thoughts. So, we leave all doors open and we believe it is a reasonable approach in conditions of global economic crisis.
Vest: As a Minister of Finance will you confirm the claims of former Minister Slaveski that if no Supplementary Budget is prepared urgently, the safety the Government ensured will be gone in September?
Stavreski: We have completed all analyses and they show that there will be need for Supplementary Budget, however, such need is not urgent. All current payments, in particular the ones related to exercising social rights, salaries, pensions, social welfare, will certainly be executed on regular basis and there is not urgent need for Supplementary Budget. Still, there is reason to revise the expenditure side by the end of the summer, and we will propose this to the Government.
Vest: Have you got any estimate how much and which expenditures to cut?
Stavreski: It will be additionally determined on the basis of the discussions I will have with all Ministries and other institutions, such as the Agency for State Roads, the Health Insurance Fund, and all other larger budget users. As a whole, the budget deficit for the first six months, from both revenue and expenditure side, is at the level of 1.4% of GDP, which is within the expectations. We envisage budget deficit of 2.8% for the whole year, and after six months passed, we reached the half of it.
Vest: Have you precisely set the amount of expenditures to be cut?
Stavreski: I would wait for the revenues realized in July and August. We have initial indications that revenues in July stabilized gradually, and I would wait to complete the discussions with all Ministries so as to have precise picture on the pace of execution of capital expenditures by the end of the year, and to be able to set the size of the Supplementary Budget. At the end of August we will be able to precisely determine this amount.
Vest: So, Supplementary Budget will be in front of the MPs in September?
Stavreski: Most probably, yes.
Vest: The opposition during the discussions about the Supplementary Budget said that the public administration during the term of office of this Government constantly increases and that 30,000 new civil servants have been employed. Does Brussels react on such voluminous and inefficient administration?
Stavreski: The opposition can say that there are 50,000 newly employed. I say it is completely incorrect, and all employments not realized prior to the anti-crisis measures for freezing the new employments will not be realized. We will be completely disciplined regarding this issue. The intention of this, as well as of all Governments, should be to employ the most professional and the most competent persons. Our country is a candidate country and has to fully professionalize the personnel in the public administration, since this a requirement for efficient public sector.
Vest: To be honest, the administration is not professional. What are the remarks Brussels send for the public administration?
Stavreski: I agree that there is need to improve the quality of the public administration. However, I would not agree that it is not professional. It is a fact that the quality of the public administration is not at a satisfactory level. In order to improve it, the Government recently established Inter-Ministerial Committee on Public Administration Reforms, which, together with SIGMA and other EU partners, will realize the public administration reform. Key segment is the improvement of the Civil Servants Law, which is in stage of negotiations with SIGMA so as to come to a quality legal framework. However, bigger challenge will be its implementation and further training of the public administration so as to respond to the needs the country will have in the process of negotiations with the EU.
Vest: Does the obligation to downsize the public administration remain?
Stavreski: The Committee has no obligation on this issue, there are no analyses showing excess of employees, but there might be need to re-deploy the personnel in certain sector. It is too early to comment anything about this. The Committee has not discussed this issue so far.
Vest: This year Macedonia will borrow EUR 370 million. There was an analysis showing that EUR 175 million borrowed for the Eurobond for a period of three and a half years incur EUR 60 million on the basis of interest alone, and that if the same amount was borrowed from the IMF, around EUR 13 million would have been paid for the interest? Why do we take unfavourable loans from private investors with close to 10% interest, and persistently reject arrangement with the IMF with very lower interest?
Stavreski: All countries, depending on the level of development, evaluate whether they want to have formal arrangement with the IMF or have the capacity to independently conduct their own policies and whether they have a need of IMF financial resources. Our estimates for the time being are that the funds necessary for this stage are provided through the Eurobond, and they should be sufficient by the end of the year. We are an IMF member and we leave the door open, during this year or in the course of the next year, if necessary, to discuss financial arrangement with the IMF if the developments in the real sector and the global economy require so.
Vest: The question is if we borrow, why do we borrow under more expensive terms? How would you explain the discrepancy of EUR 47 million in favour of Eurobond issuance?
Stavreski: If you see the statements given 5-6 years ago by the persons constantly saying today that there is a need for an arrangement with the IMF, you will see that the very same persons said it was a high time to break away from the IMF. Second, Slovenia, Croatia or any other country that by the level of development corresponds to our, did the same way, and some of them are part of the European Union. How many countries in Europe have an arrangement with the IMF? You will see that very few have concluded an arrangement with the IMF, many countries finance their needs through issuance of Eurobonds and other ways of financing this crisis year. I would like to underline once again, if we estimate that there is a need for a formal arrangement with the IMF so as to maintain macroeconomic stability, we will not have second thoughts. So, we leave all doors open and we believe it is a reasonable approach in conditions of global economic crisis.
Vest: Is there any truth in the new estimates that in September the situation will worsen and there will be devaluation?
Stavreski: Probably this is more of political comments. Developments on the foreign exchange market in the last 2 months improve and there is net purchase of foreign assets, plus the Eurobond in the amount of EUR 175 million, which increase the level of foreign currency reserves from EUR 1.35 billion to EUR 1.4 billion. We expect no pressures, and certainly there will be no devaluation.
Vest: How many funds have you withdrawn from the Eurobond for the budget needs so far?
Stavreski: No funds from the Eurobond have been withdrawn. My intention as a Minister of Finance will be to fully cover the expenditures with the current revenues, to use as less as possible funds from the Eurobond while we can, and when time comes to use such funds for they to be used for productive capital expenditures.
Allegations on fees are an absurdity
Vest: It is said that first procurement of buses for Skopje, sports halls and swimming pools, as well as procurement of 200 armoured carriers for the Ministry of Defense is to be carried out so as to collect large fees, and then comes the conclusion of an arrangement with the IMF.
Stavreski: Absurdity.
