FYR Macedonia Policy Based Guarantee

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The objective of the Policy Based Guarantee (PBG) Program for Former Yugoslav Republic of Macedonia is to help reduce future risks to stability by strengthening sustainability of public finances and the resilience of the financial sector and to support improved protection of the most vulnerable and to enhance incentives for formal labor market participation. This program document describes the PBG to the Former Yugoslav Republic of Macedonia (FYR Macedonia) to support the government's program aimed at strengthening sustainability of public finances and functioning of labor markets, improving performance of social protection, and strengthening resilience of the financial sector. The medium-term fiscal policy supported by the program will remain supportive of macroeconomic stability, as well as nascent growth recovery. The program, among others, supports measures to enhance incentives for formal labor market participation. In addition, the program will continue to support social protection reforms to ensure that future growth is more inclusive than before, and financial sector stability, including by supporting an independent and accountable monetary authority and strengthening contingency planning. The PBG is proposed in light of the country's strong track record in macroeconomic management, improving structural and social policies and adequate external financing plan. FYR Macedonia restored macroeconomic stability early in the transition process and has maintained it for almost one and a half decades. This, combined with structural reforms, facilitated stronger growth prior to the crisis while keeping internal and external balances manageable.