Journal Issue

IMF Executive Board Completes the First Review under the Stand-By Arrangement for Republic of Kosovo

International Monetary Fund. European Dept.
Published Date:
January 2016
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On January 15, 2016, the Executive Board of the International Monetary Fund (IMF) completed the first review of Republic of Kosovo’s economic performance under the Stand-By Arrangement (SBA). The completion of the review enables the disbursement of SDR 28.1 million (about €35.6 million), which would bring the total disbursements under the SBA arrangement to SDR 56.2 million (about €71.2 million).

On July 29, 2015, the Executive Board approved a 22-month SBA for Kosovo (see Press Release No. 15/362), in the amount of SDR 147.5 million (about €184 million at the time of approval). The SBA supports the government’s economic program, which aims at raising Kosovo’s economic potential by creating fiscal space for growth-enhancing expenditure and preserving low debt, upgrading key infrastructure by catalyzing donor resources, and boosting competitiveness by realigning labor costs, removing structural obstacles to credit, and creating a more level and transparent business environment.

Following the Executive Board’s decision, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:

“Kosovo has performed strongly under the program and the economy is recovering from a slowdown. Maintaining the momentum of program implementation in the period ahead will help deepen macroeconomic and financial stability and support robust growth.

“Progress in strengthening public finances has been key to the program’s success. The authorities have stayed within the fiscal rule’s deficit limit while taking steps to improve the composition of the budget by reducing unproductive current spending, and building space for growth-enhancing capital investments. The 2016 budget is in line with the program and will continue to strengthen public finances while supporting growth.

“The authorities are taking key steps to make Kosovo’s financial safety net stronger and its banks safer, including through adoption of an emergency liquidity assistance framework, progress toward risk-based supervision for all banks, and a new macroprudential policy framework. The authorities are also taking steps to promote banks’ ability to extend credit by improving the central bank’s holder account registry, closing legal loopholes in the enforcement system, and reviewing the system of private enforcement agents.

“Improving competitiveness is a necessary condition for Kosovo to achieve higher, inclusive long-run growth. To this end, the authorities have taken several significant measures, including: modification of the investment clause under the fiscal rule to create space for additional productive, donor-financed capital investment; adoption of a public wage bill that will move away from a pattern of excessive wage increases and make it easier for the private sector to hire and retain talent; and establishment of a centralized public procurement system that will generate savings and lead to a more transparent and level playing field.”

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