infrastructural projects, and more important, through relatively solid and sound credit support. the credit support, however, was enabled through the continuous, albeit gradual, growth of the total domestic savings, including savings in the banking system. looking ahead, there is no doubt for a need of investment growth, meaning an undisputed necessity for encouraging domestic savings in order to reduce the gap between domestic savings and investments. otherwise, the gap will need to be financed to a significant extent by external sources, although such conditions are not unusual for developing countries, which, in conditions of limited domestic resources, are directed towards the use of external sources for supporting investment and economic growth. it is also important that the lack of domestic savings in one part is compensated by the high inflows of private transfers, which are maintained at a relatively high level in the macedonian economy, which is close to the level of the domestic savings rate. in addition, the structure of financial flows from abroad shows larger funding through fdi inflows, which mitigates the risks to external sustainability. however, debt financing is also mounting, attributed by both public and private sector. although, according to most indicators of external indebtedness, macedonia is still in the " safe zone ", the growth of external debt is undoubtedly a signal for additional vigilance by policy - makers, which is especially true for developing countries. bearing in mind that, despite the positive developments, the domestic savings rate in the macedonian economy remains below the average and among the lower rates in the cesee countries, an active contribution from all counterparties is necessary. for banks, this means continuous improvement of the offer of savings products, which will be price - competitive, but also adjusted to the needs of the " ordinary " depositor and keeping - up with the challenges of the modern life. in this context, i would also mention the savings that are still out of the official channels and whose attraction and channeling into official financial channels can significantly increase financial intermediation. let's not forget the potential of the non - banking financial sector, which through a more active promotion and financial education of citizens on alternative forms of saving, can contribute to the mobilization of additional savings from the households. the development of the institutional investors creates a base for the development of the domestic capital market and increasing its importance as a financial intermediary in the economy. the role of the institutions is also important. we, as the national bank, within our

allow for lower taxes and facilitate private investment and also government investment. low interest rates give the public sector more scope for investment to improve the public infrastructure. a comparison of growth rates in europe confirms that countries with lower deficits have faster growth rates, whereas countries like germany, which have repeatedly exceeded the pact ’ s 3 % deficit limit ( 2002 : 3. 5 %, 2003 : 4 %, also expected to be well over 3 % in 2004 ), have to battle persistent stagnation and unemployment. the pact is therefore also a sort of insurance against the typical risks to growth and prosperity in modern societies with a high spending - to - gdp ratio. it is insurance against the temptation to use lavish government benefits to buy votes in the present and pass the bill on to future generations which are not yet eligible to vote. “ sustainability ” is not just an ecological principle ; it is also a principle of fiscal responsibility. it is particularly important against the backdrop of the demographic strains and the attendant hidden government debt caused by an ageing society. we need to remember that “ economy ”, in the sense of its greek root word oikonomia, simply translates to “ management of a household or family ”, ie rule - based behaviour. 3. thirdly, the obligation to keep government deficits below the 3 % limit is by no means rigid. weighing up all the pros and cons, it is an appropriate and sound course of action. – the pact strives to achieve balanced budgets throughout the entire economic cycle. budgetary positions close to balance or in surplus in good years allow automatic stabilisers ( cyclically - related lower tax revenue, higher costs of unemployment ) in economically bad years. – practical experience ( eg abeyance if a member state has promised to take measures which have not yet been implemented ) has shown that the monitoring and infringement procedure is quite time - consuming. in practice, the process from “ early warning ” to “ recommendations ” to “ defining a deadline for adaptation ” to the imposition of an interest - free loan to a fine may last two to three years - giving governments sufficient time to take flexible adjustment measures. – finally, what is often forgotten is that the 3 % - limit was chosen for maastricht against the background of an expected nominal growth rate of 5 % and a real trend growth rate of 3 % ( 3 % nominal deficit in terms of 5 % growth result in a trend debt level of 60 % ). today we know that