SKOPJE, December 13, 2024 - North Macedonia can address its growing debt and ensure macroeconomic stability by improving its fiscal condition through strengthening budget discipline, increasing the efficiency of public spending, and enhancing tax collection, according to new report titled North Macedonia Public Finance Review: Ensuring Stability and Boosting Resilience, released by the World Bank Group today.
The report highlights that the recent strategy of relying on economic growth to reduce North Macedonia’s fiscal imbalances has not produced sufficient results. Over the past decade, the country has faced higher fiscal deficits than its peers in the Western Balkans, with a debt level exceeding 62 percent of its gross domestic product (GDP). Consequently, increased efforts are necessary to ensure that North Macedonia remains on its path toward convergence with the European Union (EU).
"To be well-prepared for the future, it is crucial for North Macedonia to tackle fiscal challenges now," said Massimiliano Paolucci, World Bank Country Manager for Kosovo and North Macedonia. "Ensuring strong macroeconomic foundations can contribute to sustained economic development and poverty reduction as North Macedonia moves toward EU membership."
Aligned with North Macedonia's Fiscal Strategy for 2025-2029, the report identifies significant potential for improving tax compliance and optimizing public spending. World Bank estimates suggest that tax revenues could be increased by 3.5 percentage points of GDP through measures such as reducing VAT exemptions, implementing progressive income taxes, and raising environmental and property taxes.
According to the report, by enhancing tax collection and optimizing expenditure, North Macedonia has the opportunity to lower borrowing costs and allocate more resources toward essential sectors critical to its future, such as education and healthcare.
The report outlines a series of recommended policy actions aimed at guiding the country toward a more sustainable fiscal path. These recommendations include concrete measures to increase tax revenues, reforms to enhance the effectiveness of public administration, and efforts to improve the efficiency of public service delivery.
The World Bank Group partners with North Macedonia on various financial and knowledge projects aimed at enhancing the efficiency, transparency, and sustainability of public expenditure, improving revenue administration effectiveness, and spanning multiple sectors including education, social services, and agriculture.
Read full report.
