North Macedonia’s government has scrapped VAT on basic foodstuffs as part of the €400mn worth measures adopted on March 9 to ease the effects of the economic crisis caused by the Russian invasion of Ukraine.

The government adopted a package of 26 measures and recommendations divided into two categories - for protection of living standards of citizens and maintaining the liquidity and financial support of companies.

According to the Finance Minister Fatmir Besimi, the set of measures is worth about €400mn of which €90mn are waivers of revenues, and about €310mn are direct fiscal expenditures.

“In the post-pandemic conditions, we are facing the biggest economic crisis that Europe and the world remember in recent times,” Prime Minister Dimitar Kovacevski said presenting the measures.

“At the global level, the rise in food and energy costs as a result of Russia's military aggression against Ukraine is being felt. This will be a difficult year, but with good policies and measures, we will make it better,“ Kovacevski said.

The government decided to reduce the preferential VAT rate on basic food products such as bread, sugar, flour, sunflower edible oil, UHT milk, fresh meat, rice and eggs, from 5% to 0%.

The margins on selling prices of some basic food products will be also frozen.

“This measure prevents the creation of excessive profit, and will mitigate the impact of the price shock on a selected category of food products,” the government said. Customs duties on import of food will be also scrapped.

The application of the preferential tax rate of 5% for the supply of electricity to households will be prolonged. This measure will mitigate the impact of the rising electricity prices on the world stock markets and protect the living standards of citizens.

The preferential tax rate will be valid until December 2022.

The government decided to prolong the imposition of the environmental energy tax due to the large increase in oil prices.

The VAT on diesel, unleaded gasoline, gas oil, liquefied petroleum gas (LPG) and methane will be reduced from 18% to 10%.

The excise duties on unleaded gasoline, diesel and extra light heating oil will be also reduced. These measures will have a direct impact on the retail price of these fuels.

There will be also VAT exemption on import of natural gas, electricity, heat or cooling energy.

Companies will be supported by providing favourable loans.

PM Kovacevski also urged for rational use of energy.

“At the same time, I assure you that there are enough grain, food, fuel and energy in the commodity reserves, so that the citizens do not succumb to any speculations. However, the challenge is different - the prices are enormously high on the world stock exchanges and that is what we are dealing with today,” Kovacevski said.