North Macedonia’s public debt has increased over the decades, but the pace of borrowing has varied from one government to another. The Institute for Economic Analysis and Policy “Finance Think” has compared the different periods of government to determine when the largest increase in liabilities was recorded.
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When it became an independent state, Macedonia already had considerable liabilities. At that time, the country held around $850 million in direct liabilities and obligations related to external debt, while it also assumed a share of the undivided debt of the former SFRY. According to estimates by the International Monetary Fund (IMF), at the end of 1994, medium- and long-term external debt stood at around $936 million.
The “Finance Think” analysis begins with data from 1999, when state liabilities amounted to just over €1.2 billion. The prime minister at the time was Ljubčo Georgievski, who led the government until 2002. During his term, debt increased by more than €560 million.
The armed conflict of 2001 had a significant impact on this increase. IMF data from that period show that real Gross Domestic Product fell by 4.5 percent, while additional security spending reached around 6.7 percent of GDP. This additional spending put pressure on the public budget and contributed to the increase in debt.
During Branko Crvenkovski’s government, the trend changed. Debt decreased by around €107 million, while its share of GDP fell by 5.5 percentage points.
During the government of Vlado Bučkovski, liabilities began rising again, but to a more limited extent. Total debt increased by around €96 million, while its ratio to GDP fell by 4.4 percentage points.
This period also saw the issuance of Macedonia’s first Eurobond on international financial markets. In December 2005, a €150 million Eurobond was issued. These funds were not used to finance new debt, but to repay and refinance existing liabilities to the London Club of creditors. A report by the European Bank for Reconstruction and Development at the time stated that this amount was used to repay debt of around $221 million.
The largest absolute increase in liabilities, among the periods examined, was recorded during the government of Nikola Gruevski.
Gruevski served as prime minister from 2006 to 2017. According to “Finance Think” calculations, around €2.2 billion in new government debt was accumulated during those years.
Including guaranteed debt, which reached around €681 million, the total increase in liabilities during this period amounted to approximately €2.9 billion.
For this reason, Gruevski’s term ranks first in terms of the absolute increase in debt in the “Finance Think” analysis.
Borrowing continued in the following years. During Zoran Zaev’s government, government debt increased by almost €2.2 billion, while guaranteed debt rose by €185 million. In total, the increase was around €2.4 billion.
During the same period, the debt-to-GDP ratio rose by 13 percentage points. One factor that contributed to this development was the coronavirus pandemic, which caused extraordinary economic difficulties, hit public finances and increased the state’s need for financing.
Debt also continued to rise during Dimitar Kovačevski’s term. “Finance Think” estimates that the increase during this period was around €1.7 billion. Of this amount, around €1.5 billion consisted of government debt and around €159 million of guaranteed debt.
The calculations also include the period of the current prime minister, Hristijan Mickoski. By the end of the second quarter of this year, specifically by the end of June, additional government debt had reached almost €1.8 billion.
Meanwhile, guaranteed debt increased by around €75 million, bringing the overall increase in liabilities to approximately €1.9 billion.
The latest data used in the analysis show that at the end of June this year, the total debt of the state and public sector stood at €10.726 billion, or 58.8 percent of GDP.
The comparison shows that borrowing was part of almost all periods of government, but its level varied considerably. In absolute figures, government and guaranteed liabilities increased the most during Nikola Gruevski’s government, by around €2.9 billion.
Significant increases were also recorded during Zoran Zaev’s government and the current government. However, these figures must be assessed by taking into account the length of the terms in office, economic circumstances, the impact of the pandemic, changes in GDP and the way the state’s needs were financed.
For this reason, the amount of debt accumulated is not sufficient on its own to assess the sustainability of public finances. Alongside the absolute figure, the ratio of debt to the size of the economy must also be considered, with the debt-to-GDP ratio serving as the main indicator.
Nevertheless, if only the amount of new government and guaranteed debt accumulated during the periods analyzed by “Finance Think” is taken into account, Nikola Gruevski’s term remains the one with the largest increase, at around €2.9 billion.
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