Finance Minister Zoran Stavreski | Photo by: vlada.gov.mk
As Macedonia’s Finance Minister, Zoran Stavreski, defended government plans to cut the budget by 5 per cent, opposition Social Democrats on Wednesday contested his estimates about the size of the national debt.
Stavreski, who on Monday survived a no-confidence vote in parliament, insisted that public debt rose to an historic high in 2005, when the Social Democrats were in power.
“The debt was then equivalent to 38.4 per cent of the GDP whereas today it is 26.8 per cent,” Stavreski said.
But Igor Ivanovski, a Social Democrat legislator, said this figure was a “manipulation”, and then presented a document in which Stavreski allegedly calculated the size of the public debt based on unrealistically high economic growth predictions of of 5.8 per cent for this year.
“That is how he reached his favourite figure of 26.8 per cent,” Ivanovski said, adding that the real size of the debt was equivalent to at least 30 per cent of GDP.
The government initially came out with an optimistic forecast of a 4.5 per cent growth this year. Amid shrinking exports caused largely by the European crisis, it recently lowered the forecast to 2 per cent.
However, this still looks optimistic as the IMF and the World Bank do not expect more than 1 per cent growth in Macedonia this year.
Opposition parties and some experts say they are worried by the recent rise in borrowing. In the last six months alone the country has borrowed or agreed to borrow some 460 million euro.
In April the World Bank said it planned to give Macedonia $100 million (about 79 million euro) to pursue economic reforms and address health, education and social welfare issues at a time of crisis.
Earlier that month Macedonia took out a loan of 250 million euro from Deutsche Bank to fill the gap in the readjusted budget and refinance euro loan stock. The interest on the bank loan is 6.83 per cent and Macedonia has to return the money in five years.
In November 2011, Macedonia borrowed 130 million euro from the Deutsche Bank and Citibank with a guarantee from the World Bank.
“In the last three years annual economic growth has not exceeded 1 per cent while the [national] debt had risen 6 per cent each year,” Social Democrat legislator Marjanco Nikolov claimed.
The opposition argues that since 2006, when the centre-right VMRO DPMNE party of Prime Minister Nikola Gruevski took power, Macedonia has doubled its debt.
“This is surely a Greek scenario,” Nikolov said, predicting bankruptcy.
At a session that is still ongoing, the government proposes shaving 5 per cent off the 2.7 billion euro budget, projecting gross savings of some €120 million.
“We have made cuts in all ministries and budget beneficiaries without exception,” Stavreski said, explaining that they were aiming to even out the impact.