EU Provides €50 Million Loan to North Macedonia Amid Energy Crisis

The European Commission has disbursed financial, assistance of €50 million in loans to North Macedonia as part of a €100 million Macro-Financial Assistance (MFA) operation to support the country's economy amid the energy crisis triggered by Russia's invasion of Ukraine. This loan represents the first tranche of the ongoing MFA operation, with a second tranche of €50 million available upon the country's progress in implementing agreed conditions.

Why this matters: This million, financial, support, ca package highlights the EU's commitment to supporting its neighboring countries during times of crisis, demonstrating its role as a stabilizing force in the region. The loan's impact will be felt beyond North Macedonia, as it sets a precedent for the EU's response to economic crises in other countries.

The assistance aims to support macroeconomic stability and ensure further reforms related to North Macedonia's current program with the International Monetary Fund (IMF). It will also help the country advance on its European path. The European Commission determined that North Macedonia fulfilled the relevant political obligations agreed with the EU for the release of the first tranche.

North Macedonia has made commendable progress in various areas to meet these obligations. The country established an independent fiscal council and strengthened its public investment management. The government also adopted tax policy measures to broaden the tax base and improve public revenues. Further progress has been made in formalizing the informal economy, improving energy efficiency, and strengthening the judiciary with a new Justice Reform Strategy.

The European Commission highlighted North Macedonia's efforts, stating,"The assistance provides further support to North Macedonia, whose economy has been severely hit by the recent energy crisis, which was triggered by Russia's full-scale invasion of Ukraine. "The country's external balance has declined rapidly due to its high dependence on imports of fuel and electricity. North Macedonia also faces large external debt repayment requirements in 2023 amidst challenging financing conditions.

The MFA operation is part of the EU's broader engagement with neighboring countries, intended as a crisis response instrument for countries involved in the enlargement process or facing serious balance of payments issues. The European Parliament and the Council of the EU approved the proposal for the MFA operation on July 12, 2023, demonstrating strong solidarity with North Macedonia. Since 2020, the EU has provided approximately €210 million in support to the country under the MFA framework, including the recent €50 million disbursement.

The €50 million loan to North Macedonia is a significant step in supporting the country's economy during the ongoing energy crisis. The assistance not only provides financial relief but also encourages further reforms and progress on North Macedonia's European path. As the country continues to fulfill agreed conditions, the second tranche of €50 million remains available, potentially bringing the total MFA support to €100 million.