Kosovo has been hit hard by the COVID-19 pandemic. Despite policy support, economic activity is estimated to have fallen 6 percent in 2020 on account of the combined effect of strict domestic containment measures and international travel restrictions. The fiscal deficit increased to 7.7 percent of GDP, given the large fall in tax revenues and the implementation of mitigation and recovery measures of 4.2 percent of GDP. The current account deficit is estimated to have increased to 7.5 percent of GDP mainly due to a large decline in diaspora-related inflows, most notably in tourism. Gross international reserves declined but remain adequate in part due to the purchase under the IMF’s Rapid Financing Instrument (RFI) in April 2020 and the use of other external financing. Banks have weathered the recession well to date, and the high pre-COVID19 liquidity levels and ample capital buffers bode well for the system’s stability.
The COVID-19 pandemic has caused dramatic loss of human life and major damage to the European economy, but thanks to an exceptionally strong policy response, potentially devastating outcomes have been avoided.
The Articles of Agreement of the International Monetary Fund were adopted at the United Nations Monetary and Financial Conference (Bretton Woods, New Hampshire) on July 22, 1944. They were originally accepted by 29 countries and since then have been signed and ratified by a total of 189 Member countries. As the charter of the organization, the Articles lay out the Fund’s purposes, which include the promotion of “international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems”. The Articles also establish the mandate of the Organization and its members’ rights and obligations, its governance structure and roles of its organs, and lays out various rules of operations including those related to the conduct of its operations and transactions regarding the Special Drawing Rights. The key functions of the IMF are the surveillance of the international monetary system and the monitoring of members’ economic and financial policies, the provision of Fund resources to member countries in need, and the delivery of technical assistance and financial services. Since their adoption in 1944, the Articles of Agreement have been amended seven times, with the latest amendment adopted on December 15, 2010 (effective January 26, 2016). The Articles are complemented by the By-laws of the Fund adopted by the Board of Governors, themselves being supplemented by the Rules and Regulations adopted by the Executive Board.
The COVID-19 pandemic will hit Montenegro hard, as tourism is a key industry. Fiscal space has eroded in recent years due to large public capital outlays, and the COVID-19 crisis is creating new budgetary strains as health spending and other expenditures rise, while the economic contraction lowers revenues.