IMF Executive Board Completes the Second and Third Reviews of Kosovo’s Stand-By Arrangement

IMF News, March 13, 2017

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Canonical URL: IMF Executive Board Completes the Second and Third Reviews of Kosovo’s Stand-By Arrangement

On March 13, 2017, the Executive Board of the International Monetary Fund (IMF) completed the second and third reviews of the Republic of Kosovo’s economic performance under the Stand-By Arrangement (SBA).
Completion of the reviews enables the disbursement of SDR 79.20 million (about €100 million).
This disbursement would bring total disbursements under the SBA to SDR 135.40 million (about €172 million).
The Board approved the authorities’ request to extend the current SBA to August 4, 2017 to facilitate policy continuity and allow time for ongoing structural reforms to progress.

On July 29, 2015, the Executive Board approved a 22-month, SDR 147.50 million SBA for Kosovo.
The SBA supports the government’s economic program aimed at:
- raising Kosovo’s economic potential by creating fiscal space for growth-enhancing expenditure;
- preserving low debt;
- upgrading key infrastructure by catalyzing donor resources;
- boosting competitiveness by realigning labor costs, removing structural obstacles to credit, and creating a more level and transparent business environment.

The IMF assessment (statement by Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair) highlights:
- “Kosovo has performed strongly under the program. The economic recovery continues, led by robust domestic demand growth.”
- “Policy implementation has been laudable. Maintaining this momentum through the end of the program will help to lock in these gains in macroeconomic and financial stability.”
Stronger public finances were identified as key to the program’s success:
- Authorities have remained well within their fiscal deficit limit while improving budget composition.
- Budget composition improvements were achieved by shifting focus away from unproductive current spending and creating more space for growth-enhancing capital investments.
- The authorities have significantly boosted fiscal buffers, viewed as critical to macroeconomic stability in a unilaterally euroized country.
- The 2017 budget is described as being in line with the program’s objectives and expected to support healthy public finances, a further shift toward capital investment projects, and other measures to support durable growth.

The authorities have taken steps to strengthen Kosovo’s financial safety net:
- Adoption of a macroprudential policy framework, which the authorities are now operationalizing.
- Work toward improving the contract enforcement system to allow for more efficient recovery of collateral and distressed assets, intended to enable the bank lending needed to bolster stronger economic growth.
Measures to improve the business environment:
- Intensified efforts to mobilize donor financing for major infrastructure projects under the fiscal rule’s revised investment clause.
- Continued enhancements to the transparency and efficiency of the public procurement system.

Source: IMF Press Release No. 17/80, March 13, 2017