Skopje, 13 December 2024 (MIA) - North Macedonia can tackle its rising debt and ensure macroeconomic stability by improving its fiscal situation through strengthened budgetary discipline, improved efficiency of public spending and enhanced revenue collection, concludes the World Bank Group in its North Macedonia Public Finance Review: Ensuring Stability and Boosting Resilience.

“In order to prepare for the future, it is key for North Macedonia to start dealing with the fiscal challenges now,” World Bank Country Manager for Kosovo and for North Macedonia, Massimiliano Paolucci, said at the presentation of the review.

According to Paolucci, ensuring firm macroeconomic foundations can contribute to sustainable economic development and reduction of poverty as the country moves closer to EU membership. 

Regarding the sustainability of the country’s pension system, the review states that the 2005 reform of the system improved the midterm and long-term fiscal sustainability by ensuring even benefit levels across generations, but that this has been endangered by later ad-hoc changes of policies. The World Bank notes that the country’s pension deficit would continue to grow if reforms aren’t implemented.

“Three policy proposals have been suggested to reduce the pension deficit in a rapidly aging society: reverse the recently introduced price-wage pension indexation pattern back to previous indexation; gradually increase and equalize retirement ages for men and women; gradually raise contribution rates. A combined policy package integrating all three policies could yield more balanced outcomes, preventing the further buildup of pension expenditures and deficits,” the review states. 

According to the review, there is a significant potential to raise tax revenues and optimize public spending. The World Bank estimates that by rationalizing tax exemptions, introducing taxation progressivity and increasing environmental, health, and property taxation, the country could raise tax revenues to 3.5 percent of GDP.

The World Bank Group is a partner to North Macedonia in various projects for funding and knowledge aimed at improving efficiency, transparency and sustainability of public spending, and boosting the tax administration’s effectiveness. 

Photo: MIA