Press Release: IMF Mission to Kosovo Assesses Performance under the Staff-Monitored Program and Reaches Staff-Level Agreement on a Stand-By Arrangement
March 5, 2012Press Release No. 12/65
March 5, 2012
An International Monetary Fund (IMF) mission, led by Johannes Wiegand, visited Kosovo during February 23 – March 5,2012, to conduct the second and final assessment of Kosovo’s Staff Monitored Program1 and hold discussions on a new Stand-By Arrangement (SBA) with the IMF.
At the conclusion of the visit, Mr. Wiegand made the following statement:
“Kosovo’s economy has continued to withstand financial turbulence in the euro area fairly well, reflecting inter alia limited integration into cross-border financial markets. Real GDP growth in 2011 is estimated at 5 percent. Going forward, a possible deterioration in labor market conditions in central European countries—where most of the Kosovar diaspora lives—could negatively affect FDI and remittances. As a result, the mission has revised growth in 2012 to 3.8 percent. Inflation has eased in line with developments in global commodities markets.
“Implementation of the Staff-Monitored Program has been broadly satisfactory. Significant overperformance has been achieved with respect to fiscal targets, with an overall deficit in 2011 of 1.8 percent, compared to a program target of 2.9 percent. Most structural conditionality has also been met, with important progress especially in the area of financial sector reforms. A structural benchmark on forming working groups to cost possible benefits for war veterans and erstwhile political prisoners has been met only with a delay.
“The Kosovar authorities and the IMF mission reached staff-level agreement on an economic program that could be supported by a 20-month SBA in an amount of SDR 91 million (about €107 million). Key program objectives include: (i) continue the process of fiscal consolidation that was started with the Staff-Monitored Program, aiming at a sustainable budgetary stance in two years time, (ii) anchor fiscal policy in the long term, possibly through the introduction of a legally binding fiscal rule, (iii) enhance budgetary planning and execution, including through careful costing of spending initiatives, and (iv) further improve the stress resilience of the financial sector, including by granting the central bank the resources to provide emergency liquidity assistance to banks if needed. Consideration of the program request by the IMF Executive Board is tentatively scheduled for end-April.”
1A Staff-Monitored Program is an informal agreement with IMF staff to monitor the implementation of the authorities’ economic program. It does not entail endorsement by the IMF Executive Board and does not involve financial assistance by the IMF.