a period of significant credit expansion. it should be underlined that according to the supervisory examinations of the nbrm, the newly extended credits are granted to good clients. in december 2000, compared to the same month of 1999, the banks ’ foreign currency placements to the nongovernment sector decreased by denar 1, 421 million, or by 17. 2 %. the fall was primarily due to the higher attractiveness of the banks ’ denar credits due to the higher interest rates. at the end of march 2000, the nbrm continued with further reforms of the monetary policy instruments, where the abolishment of the credit ceilings being the most significant one. hence, the transition to indirect market - oriented instruments for monetary regulation has entirely been completed. moreover, the existing monetary instruments have been improved in order to be modern and closer to those used in developed market economies. within the framework of continuous and intensive efforts to lower the banks ’ interest rates, the nbrm, in april 2000, decreased the discount rate and the lombard credit interest rate by one percentage points, thus reducing them to 7. 9 % and 17. 5 % p. a. respectively. on december 30, 2000, according to the new methodology, the nbrm gross foreign exchange reserves equaled usd 478. 1 million. domestic and international payments liquidity in the republic of macedonia in 2000, the liquidity of the banking system considerably improved. in january – december 2000, compared to the same period of 1999, the average daily liquidity of the banking system was by 42. 1 % higher. this resulted in decrement of the demand for liquid funds by the banks, which was reflected upon the movement of the interest rate on the money market. in december 2000, the average weighted interest rate on the money market amounted to 7. 1 % and was by 4. 5 percentage points lower compared to the same month of 1999. the international liquidity in the payments is visible through the ability of servicing the external debt. on september 30, 2000, the external debt of the republic of macedonia, based on disbursed medium - term and long term foreign credits, amounted to usd 1, 400. 8 million. compared to the end of 1999, the external debt of the republic of macedonia was reduced by usd 37. 7 million, as a result of the repayment of the regular liabilities, as well as the exchange rate differentials. according to the payment schedule, lia

banks deposit potential and the growth in the government deposits with the central bank. in 2001, total banks ’ credits in favor of the non - government sector should increase by denar 5, 420 million or by 13. 1 %. observed by structure, the denar credits are projected to increase by 10. 9 %, or by denar 3, 610 million, while the foreign currency credits are projected to increase by 21. 5 % or by denar 1, 810 million. the monetary policy will be aimed at achieving the projected dynamics of the economic growth in the republic of macedonia, creating room for growth of banks ’ credits to the non - government sector. simultaneously, the downward trend in lowering the share of the non - performing credits in total banks ’ credit exposure is expected to continue. this should derive from the initiated improvements in the commercial banks ’ credit policy, stimulated by the strengthened banks'corporate governance, on one hand, as well as by the continuous strict supervision examination on the banks operations by the central bank, on the other hand. foreign exchange reserves, balance of payments in 2001, the central bank ’ s net purchase of foreign currency on the foreign exchange market, together with the movements in the government external account with the nbrm and the inflow based on interest received on the foreign exchange funds deposited abroad, is expected to result in increased gross foreign exchange reserves of the nbrm by us dollar 75 million, ( government deposits with nbrm are included in the new definition for foreign exchange reserves ). thus, the foreign exchange reserves should increase from the level of 3, 5 to 3, 6 months of imports of goods and services in the current year. the projected developments in the balance of payments in 2001 should result in deficit on the current account in the amount of 8, 2 % of the gross domestic product ( if the official transfers are included ), i. e. 9, 1 % of the gdp ( if the official transfers are excluded ). * * *