Debt, Deficits, and Reform Imperatives: Rethinking the Fiscal Strategy of North Macedonia

Aleksandra Nakjeva Ruzhin ()
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Aleksandra Nakjeva Ruzhin: World Bank Consultant, Former Special Advisor to the Minister of Finance and State Advisor at the Ministry of Finance

Chapter Chapter 38 in Economic Resilience and Sustainability—Vol. 1, 2025, pp 649-664 from Springer

Abstract: Abstract This study explores the key drivers of North Macedonia's fiscal deterioration, marked by persistent budget deficits and a sharp rise in public debt to a historic high of 62.4% of GDP by 2024—an increase of 39.4%, or 2.7 times its 2008 level. It offers a critical assessment of the credibility of the projected medium-term debt trajectory that is premised on expectations of robust economic growth and optimistic fiscal projections, which may fail to materialize amid heightened global trade-related uncertainty and rising geopolitical tensions. Structural weaknesses—such as stagnant productivity, a shrinking working-age population, and high youth emigration—combined with low statutory direct tax rates, widespread tax expenditures, growing spending pressures, and significant budget rigidity—further undermine the fiscal consolidation outlook. A realistic reassessment of the medium-term fiscal strategy, underpinned by evidence-based tax policy and structural expenditure reform, constitutes a prerequisite for formulating a more credible and accelerated fiscal consolidation path. Institutionalizing the “value-for-money” framework and embedding spending reviews into the regular budget process may support the consolidation process, by helping enhance the effectiveness and the technical, allocative, and functional efficiency of public spending.

Keywords: Fiscal consolidation; Fiscal sustainability; Public debt; Spending reviews; Tax expenditures; Public spending (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-04218-7_38

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DOI: 10.1007/978-3-032-04218-7_38

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