€500 Million Loan Raises Queries in Macedonia

Macedonia's decision to borrow €500 million was revealed in the latest Official Gazette, which said the money would be borrowed in the third quarter of this year “for financing the budget needs of this year and the next”.

Prime Minister Nikola Gruevski denied that the loan has anything to do with budget deficit worries, insisting that the country does not need any loans now, but is raising money in order to refinance old debt that will be up for returning next year start.

“At the moment, we have no such urgency,” Gruevski told the media. “Our estimate is that now is the right moment to make a move, so we can raise finances under best possible conditions [on world markets], which will be used mainly for refinancing previous debt.”

However, a former Finance Minister, Nikola Popovski, said the Prime Minister was not telling the truth.

“If the money is really intended for refinancing old debt, created by the previous Eurobond from 2005, worth €150 million, then why are we raising €500 million?" he asked.

He said the real reason for the loan was that "the government has accumulated a huge [budget] deficit that annually amounts to €300 or €400 million, which must be financed from somewhere”.

According to data from the Finance Ministry, in the first four months of this year alone, Macedonia spent two-thirds of its predicted budget deficit for the whole of 2014.

The ministry report revealed that in the first four months, the government also spent almost €200 million more than it gathered in taxes. This sum amounts to two-thirds of the planned €300 million budget deficit for 2014, which is set at 3.5 per cent of GDP.

Other experts blame the increase in spending on...