Republic of Kosovo: Staff Report for The 2017 Article IV Consultation—Informational Annex

2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Kosovo

Abstract

2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Kosovo

Fund Relations

(As of December 31, 2017)

Membership Status:

Joined: June 29, 2009; Article VIII (as of January 11, 2018).

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Latest Financial Arrangements:

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Projected Payments to Fund 1

(SDR Million; based on existing use of resources and present holdings of SDRs):

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Implementation of HIPC Initiative: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

Safeguards Assessments

The update safeguards assessment, conducted in connection with the SBA approved in July 2015, found that the Central Bank of Kosovo’s (CBK) governance practices are appropriate. The CBK’s financial reporting system is adequate and the bank has established an effective system of controls in its reserves management and vault operations. The assessment made recommendations to strengthen the internal audit function, amend the CBK Law, and revise the external auditor selection and appointment policy. All the assessment’s recommendations have since been implemented.

Exchange Arrangements

The de jure and de facto exchange rate arrangement is one of no separate legal tender. Since unilateral adoption of the euro, this currency is a legal tender in Kosovo and circulates freely. Kosovo is not part of the euro area and the CBK is not part of the European System of Central Banks. Kosovo is an Article VIII member and does not maintain exchange restrictions or multiple currency practices, except for restrictions maintained solely for reasons of international or national security, which have been notified to the Fund pursuant to Decision No. 144.

Previous Article IV Consultation

Kosovo was on a 24-month cycle during the previous Stand-By Arrangement. The last Article IV consultation was concluded on May 20, 2015. Going forward, it is expected that Kosovo will be on a 12-month cycle.

FSAP and ROSC Participation

An FSAP mission was conducted during September 19–October 2, 2012. The FSSA included the ROSC for compliance with Basel Core Principles. Kosovo has not had a data or a fiscal transparency ROSC.

Technical Assistance

Since 1999, the Fund has provided technical assistance and policy advice to UNMIK and, since September 2008, to Kosovo. Technical assistance has centered on the Fund’s core competencies, notably in the areas of fiscal policy, the banking and payments systems, and macroeconomic statistics. Assistance has also contributed to developing key aspects of the legal and institutional framework needed for a market economy. More recently, TA has been provided on the following issues:

Real Sector

  • Government Finance Statistics (September 2015, April and October 2016; February and April 2017)

  • E-GDDS (April 2017)

Fiscal Sector

  • Tax Administration (June and October 2017)

  • Merger Customs and Tax Administration (November 2015, March and November 2016, June 2016)

  • Public Investment Management (December 2015 and April 2017)

  • Social Security (January 2016)

Monetary and Financial Sectors

  • Risk-Based Supervision (November 2015 and March 2016)

  • Insurance Sector supervision and regulation (October 2016 and September 2017)

  • Macroprudential Policy and Early Warning System (October and November 2017)

Resident Representative

Mr. Vermeulen took up his post on August 1, 2015.

Joint IMF-World Bank Management Action Plan

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Statistical Issues

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Kosovo—Table of Common Indicators Required for Surveillance

(As of January 5, 2018)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. While data are not reported for lack of capacity, authorities are working to start reporting these data in the near future.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I), and not available (NA).

Services data available on annual basis.

GNDI data not available.

1

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.