Macedonia is on its way to yet another (and much postponed) donor conference. Donor conferences are charades. They consist of photo opportunities for donor and recipient politicians signing agreements sealed long beforehand. But even as charades go, the existence of an IMF arrangement with the needy country was hitherto considered a sine qua non.

Yet, Macedonia has no such arrangement. It is under IMF "staff monitoring". This means that it may apply and even qualify for stand-by loans - but also that its finances are in disorder. The victim of seriatim external shocks (transition, reluctant independence, embargoes, wars, and, lately, a civil war) - Macedonia's economy is in disarray. Social tensions are rising both due to a long overdue restructuring of Macedonia's obsolete industry and to the shameless corruption that permeates every government organ and state-owned enterprise.

In the last two years, Macedonia has re-written most of its economic laws. It has started to implement anti-money laundering measures. It has dismantled the venal payment system and privatized it to the banks. It has rationalized its tax system and introduced VAT. It has shut down or sold most of the industrial loss-makers. It has sold Macedonia's largest commercial bank to the Greeks and its telecom to MATAV. It has applied to join the WTO and plans to join CEFTA. It is in the throes of modernizing its capital markets. It deserves the $228 million it would like to get (and the $173 million promised).

The money is supposed to plug Macedonia's financing gap - and, thus, be out of the reach of avaricious politicians. Yet, money is a fungible commodity and Macedonia has squandered a lot of the international aid and credit it has received - not least by installing in power one kleptocracy after another.

Only $36 million out of $120 million disbursed for the construction of a railway line were traced in September 2001. No one was able to tell what happened to the rest. In another celebrated case, the former Minister of Defense, Paunovski, absconded with 13 million DM of the Ministry's funds. Having been accused of as much on state television by the Prime Minister - he retorted by threatening to expose the latter's alleged corruption in the privatization of the nation's only oil refinery, Okta. Paunovski resigned but was never persecuted. An audit team dispatched by the Ministry of Finance meekly went nowhere.

Macedonia deserves any help it can get. But flooding it with poorly supervised and poorly monitored funds only serves to enrich its politicians. Many Macedonians believe that this, precisely, is the intention of the West and that the donor conference is a massive backhander. The receipt of the funds was explicitly tied to political and constitutional concessions - and never conditioned on structural reforms. The IMF's departing (and often bravely and unusually outspoken) Chief of Mission, Biswajit Banerjee, has distanced himself from the conference.

Yet, even the most avid disciplinarians understand that Macedonia might collapse without these funds. It has an enormous trade deficit (close to $600 million - or 15% of its GDP), the result of an overvalued currency. It cannot rectify this by devaluing the denar because inflation is rearing its ugly head again. The monetary pillar of Macedonia's policy of economic stabilization far outweighs its fiscal pillar.

Moreover, in a year of early elections (the latest date bandied about is June 30) - budget discipline is likely to suffer. For a few scary months last year, Macedonia's budget deficit reached 9% of GDP (it later settled around 5-6%, saved by a reluctantly introduced "war tax" levied on all financial transactions). Tax collection is tottering as more than 26,000 firms (the majority of all active companies) have become insolvent. Macedonia has almost double the average private sector credit default rate among countries in transition.

Macedonia is asking for $65 million to plug the gap in its balance of payments, another $63 to reverse the effects of the civil war (which many observers fear is about to start again), $40 million for reconstruction, and $23 to cover expenses associated with the implementation of the Ohrid Framework Agreement. Some of this money has been already (and irresponsibly) advanced by the EU (mainly by the Netherlands). The World Bank will help with funds to ameliorate the social effects of the industrial devastation wrought by the transition (the latest loss-maker to be shuttered this week is "Jugohrom"). The EBRD and the IFC plan to establish a microcredit bank.

Macedonia can use all the help it can get. But effective help is predicated on circumventing Macedonia's hopelessly crooked politicians and bankers and on the strict and micromanaged enforcement of good governance clauses. Alas, the donors are so eager to prevent another conflagration that they are ignoring these important caveats. In doing so, they foster further instability. The lesson learned by Macedonia's unscrupulous decision makers may well be that conflict, war, and terrorism pay handsomely.