Brussels (Brussels Morning) – The European Commission granted North Macedonia €50 million in Macro-Financial Assistance to aid its economy affected by the energy crisis post-Russia’s invasion of Ukraine. This support complements reforms and strengthens ties with the EU.
The European Commission provided €50 million in loans to North Macedonia. This is the latest tranche of the continued Macro-Financial Assistance (MFA) operation to the country.
How Will the EU Commission’s Financial Aid Impact North Macedonia?
The assistance provides additional support to North Macedonia, whose economy has been severely struck by the recent energy crisis, which was initiated by Russia’s full-scale invasion of Ukraine. It will keep macroeconomic stability and provide for further reforms, in conjunction with the continued International Monetary Fund (IMF) programme for North Macedonia. It will also enable North Macedonia to advance on its European path.
The release of this backing comes after the Commission discovered that North Macedonia had fulfilled the appropriate policy commitments agreed with the EU for the release of the first tranche.
What Conditions Must North Macedonia Meet for EU Commission Aid?
North Macedonia gained progress in the area of public finance by setting up an independent Fiscal Council and by supporting public investment management.
To enhance public revenue, North Macedonia assumed tax policy measures which broadened the tax base. The government has also pushed further progress towards formalising the informal economy, and it has taken actions to improve energy efficiency. Lastly, the government bolstered the judiciary with a new Strategy for Judicial Reform.
The overall lasting Macro-Financial Assistance operation to North Macedonia is worth up to €100 million in loans. After the distribution of this first tranche of €50 million, a second tranche of the same amount remains unrestricted, depending on progress on the agreed policy conditions.
What is the actual purpose of MFA?
Macro-financial assistance (MFA) is a format of financial aid developed by the EU for partner countries undergoing a balance of payments crisis. It takes the form of medium/long-term loans or assistance, or a combination of these, and is only unrestricted to countries satisfied with a disbursing International Monetary Fund programme. MFA is developed for countries geographically, economically and politically relative to the EU. These include candidate and likely candidate countries, nations bordering the EU covered by the European Neighbourhood Policy (ENP) and, in particular circumstances, other third countries
What Role Does EU Commission Play in North Macedonia’s Economic Recovery?
The Commission’s recommendation for this MFA operation to North Macedonia was embraced by the European Parliament and the Council on 12 July 2023. Its enactment is further complemented by EU bilateral partnership under the Neighbourhood, Development and International Cooperation Instrument-Global Europe.
On 3 February 2023, the Commission submitted to provide up to €100 million in Macro-financial Assistance (MFA) to North Macedonia. With this reinforcement, the EU is standing by North Macedonia in difficult times. Following Russia’s unprovoked attack on Ukraine, the country’s external balance has declined rapidly because of its high dependence on imports of fuel and electricity. North Macedonia also meets large external debt repayment requirements in 2023 in the context of challenging financing conditions. Overall, since 2020, the EU has paid about €210 million in MFA support for North Macedonia. This includes this payment of €50 million.
