Negotiations with the International Monetary Fund (IMF) mission for new Precautionary Credit Line (PCL) arrangement ended successfully. Two-year arrangement under the IMF’s Precautionary Credit Line will amount EUR 480 million. IMF Board of Directors should confirm the decision on January 2011.

Deputy PM and Finance Minister Zoran Stavreski, Governor of the National Bank of the Republic of Macedonia Petar Gosev and Head of IMF mission, Wes McGrew announced Wednesday at the joint press conference.

The PCL is an instrument established earlier this year that is available to Fund members with sound economic fundamentals and policies that do not have actual financing needs but face risks that could give rise to such needs. Thus, countries with PCL arrangements would be expected not to draw upon the available funds unless there is a deterioration in external conditions.

The PCL arrangement provides countries with confidence that in the event of adverse developments they have a deep reservoir to draw upon to preserve stability. Moreover, having a PCL arrangement in place should help to strengthen confidence and facilitate better access to private capital markets.

A two-year arrangement is under the IMF’s Precautionary Credit Line (PCL) in the amount of EUR 400 million in the first year, rising to EUR 480 million in the second year.

- We have successful negotiations regarding the conditions of such credit line and certainly we will recommend approval of the request by the IMF Board of Directors, Head of IMF mission, Wes McGrew said, adding that Precautionary Credit Line (PCL) is new IMF instrument for the countries that have sound basis and policies and Macedonia is the first country to take advantage of this arrangement.

- Credit line will be based on economic programme of the authorities, more precisely of fiscal deficit of 2.5% of GPD for next year and commitment to follow the policies for support of foreign currency regime of the country. Mission considers that the policies of the authorities in this spheres are sound and strong and represent strong basis for proposed credit line, Wes McGrew said.

Finance Minister Stavreski said that the funds can be withdraw if necessary and if we come to such situation we will decide on the amount of the funds which would ne needed and can be used for all budgetary needs.

- The fact that Macedonia is the first country in the world to which IMF is approving this credit line is confirmation that the economic policies in the past period were quality and sound and it is a confirmation that IMF believes that the same level of quality and sound economic polices in all sphere will be maintained in the future in Macedonia, Stavreski said.

Governor of the National bank of the Republic of Macedonia Petar Gosev assessed as good the agreement for use of the credit line and positive event for Macedonia, because the challenges of the global economy still exist, still are high and Macedonia with the arrangement receives another confirmation for further continuation of conducting sound macroeconomic policies.

This decision means direct announcement to foreign investors and creditors that Macedonia gets another support for securing from possible risks that could come from the surrounding, Gosev said.IMF Managing Director Dominique Strauss-Kahn Welcomes Former Yugoslav Republic of Macedonia’s Interest in

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), made the following statement today:

“I welcome the decision by the Former Yugoslav Republic of Macedonia to request a Precautionary Credit Line (PCL) arrangement. Macedonia would be the first IMF member to take advantage of this new arrangement. I am very pleased by this positive response from Macedonia to the invitation I extended to economies with sound economic fundamentals and policies to use this new instrument to bolster international confidence.

“Macedonia has a sustained track record of sound economic policies. Its economic fundamentals and policy framework are strong, and the Macedonian authorities have demonstrated a commitment to maintaining this solid record. I therefore intend to move ahead rapidly in seeking approval by the Fund's Executive Board of Macedonia's request for a PCL arrangement.”

The Former Yugoslav Republic of Macedonia requested a two-year arrangement under the IMF’s Precautionary Credit Line (PCL) in the amount equivalent to SDR 344.5 million (approximately €400 million, 500 percent of quota) in the first year, rising to SDR 413.4 million (approximately €480 million, 600 percent of quota) in the second year.

The PCL is an instrument established earlier this year that is available to Fund members with sound economic fundamentals and policies that do not have actual financing needs but face risks that could give rise to such needs (see Press Release No. 10/321).

Thus, countries with PCL arrangements would be expected not to draw upon the available funds unless there is a deterioration in external conditions.

The PCL arrangement provides countries with confidence that in the event of adverse developments they have a deep reservoir to draw upon to preserve stability. Moreover, having a PCL arrangement in place should help to strengthen confidence and facilitate better access to private capital markets.