ISSN 2330-717X

Kosovo Is Back On Track With The IMF


By Linda Karadaku

The IMF and Kosovo have reached a tentative agreement on an economic programme that could be supported by a 20-month stand-by arrangement in the amount of 107m euros.

The agreement, reached on March 5th, will be voted on by the IMF executive board in late April.

The deal came after IMF Deputy Division Chief Johannes Wiegand’s visit to Kosovo for the second and final assessment of the Kosovo Staff Monitored Programme (SMP).

Wiegand said that the implementation of the SMP, an informal agreement with the IMF to monitor the implementation of the authorities’ economic programme, was generally satisfactory.

“Significant over performance was achieved with fiscal targets, with an overall deficit in 2011 of 1.8%, compared to a programme target of 2.9%. Most structural conditions were also met, with important progress in the financial sector. A structural benchmark in forming working groups for possible war veteran benefits and former political prisoners was met with a delay,” he said.

Wiegand added that the Kosovo economy “has continued to withstand financial turbulence in the euro area fairly well. Real GDP growth in 2011 is estimated at 5%,” Wiegand said, however, “a possible deterioration in the labour market conditions in central European countries, where most Kosovo diaspora lives, could negatively affect FDI and remittances.”

“As a result, the mission has revised growth in 2012 to 3.8%. Inflation eased off, in line with developments in global commodity markets,” he said.

The IMF said key programme objectives include a continued fiscal consolidation that started with the staff-monitored programme, “aiming at a sustainable budget in two years”, and a long-term fiscal policy, “possibly through the introduction of a legally binding fiscal rule”.

Among key objectives are “enhancing budgetary planning and execution, including through careful costing of spending initiatives, and [to] further improve the stress resilience of the financial sector, including granting the central bank the resources to provide emergency liquidity assistance to banks if needed”.

Muharrem Shahini, spokesperson for the Kosovo Ministry of Finance, told SETimes that the IMF assessment of the SMP agreement is generally positive. “Such an assessment has opened the way for the negotiation of the SBA agreement, which offers access to funding from this institution,” Shahini said.

“The stand-by agreement arrangement was reached under the scenario of prudent economic projections by the IMF, which takes into account the potential impact of developments in the eurozone,” he said.

This IMF agreement repaired problems Kosovo had with the Fund last year when Prime Minister Hashim Thaci’s government decided to increase significantly public sector wages.

These increases in the public sector for teachers and civil servants went from 30% to 50%, taking the state salaries from 311m euros in 2010 to 383m euros in 2011, Balkan Insight reported. Kosovo’s budget for 2011 was 1,264m euros.

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The Southeast European Times Web site is a central source of news and information about Southeastern Europe in ten languages: Albanian, Bosnian, Bulgarian, Croatian, English, Greek, Macedonian, Romanian, Serbian and Turkish. The Southeast European Times is sponsored by the US European Command, the joint military command responsible for US operations in 52 countries. EUCOM is committed to promoting stability, co-operation and prosperity in the region.

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