As in much of Eastern Europe, the monetary and public finance sectors of Macedonia remained under-developed during the era of the Yugoslav communist regime. After independence, the banking sector was plagued by the collapse of the old Yugoslav finance system, the insolvency of most companies, the freezing of hard currency deposits in Belgrade (the capital of the former Yugoslavia), and the pyramid schemes that captured the savings of thousands of citizens. With serious reforms needed in the monetary, foreign-exchange, and banking sectors, the government launched a scheme in 1995 to restructure the banks by removing bad loans (granted to loss-making state firms or insolvent private concerns) from their balance sheets. The first step taken to regain
|Exchange rates: Macedonia|
|denars per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
investor confidence was payment of compensation to the holders of foreign-exchange accounts frozen by the central bank, with small depositors receiving cash and larger depositors given government bonds. A new banking law is expected to be passed providing for strict supervision by the National Bank of Macedonia to ensure that banks are adequately capitalized, but legislation on foreign exchange, foreign trade, and foreign credit is also needed to introduce stringent and transparent rules to the sector.
Reforms in the public finance sector include the introduction of a value-added tax; the reduction of excessive employment in the public sector ; the privatization of non-essential ministerial activities; the creation of a controlled treasury system; pension reform adding a private pension system to the present public one; the establishment of a macroeconomic and budget planning unit in the finance ministry; and a continuing movement towards indirect taxation.
The largest commercial bank, Stopanska banka, has been successfully restructured and privatized by selling a majority stake to the National Bank of Greece. The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) also agreed to take stakes in Stopanska. The second largest bank is the privately owned Komercijalna banka, which was spun off from Stopanska under the communist regime. The EBRD has a stake in Komercijalna. Tutunska banka (Tobacco Bank), the third largest, was sold to Nova Ljubljanska banka of Slovenia.
Throughout the late 1990s and into the 21st century the denar has been declining in value compared to the U.S. dollar. In 1995, US$1 was exchanged for 37.882 denars. The rate has weakened since, with US$1 equal to 39.981 (1996), 50.004 (1997), 54.462 (1998), 56.902 (1999), and 59.773 denars (January 2000). By November 2000, the currency was trading at 71.22 denars to the dollar.