North Macedonia has temporarily halved its value-added tax (VAT) on fuel in a direct response to rising global oil prices driven by the ongoing conflict in the Middle East. The government announced the two-week measure to stabilise domestic pump prices for consumers.
Effective from midnight on Monday, the VAT rate on petrol and diesel will be reduced from 18 percent to 10 percent. Prime Minister Hristijan Mickoski explained that this intervention is expected to keep petrol prices stable, while diesel may see a marginal increase of approximately three to three and a half Macedonian denars (€0.04 to €0.05) per litre. The policy is designed as a short-term relief mechanism as international markets remain volatile.
Prior to the announcement, retail prices stood at around €1.40 per litre for petrol and €1.49 for diesel. The government’s action aims to insulate motorists from sharper increases amid broader economic pressure. Global oil benchmarks, while having retreated from recent peaks, have repeatedly tested the psychologically significant $120-per-barrel level since hostilities began three weeks ago, sustaining inflationary concerns for import-dependent nations.
This fiscal adjustment aligns North Macedonia with other countries considering similar targeted subsidies. For instance, South Korea recently imposed limits on fuel price hikes to mitigate the economic fallout from the geopolitical shock. Such measures highlight the immediate policy tools available to governments facing energy cost spikes, though they are often temporary fixes pending calmer international markets.
The VAT reduction will automatically expire after 14 days unless reviewed by the cabinet. Its implementation underscores the Balkan nation’s sensitivity to external oil market dynamics and the government’s priority of containing living costs for its population. The move also signals a willingness to use short-term budgetary measures to provide immediate consumer relief during periods of global instability.
Analysts note that while such tax cuts offer quick reprieve, they do not address the root causes of price volatility and may strain public finances if prolonged. The effectiveness of North Macedonia’s intervention will depend on the trajectory of crude oil prices in the coming weeks, with the government likely to assess whether an extension is warranted based on market developments and domestic price trends.
