IMF Staff Concludes Visit to Kosovo

IMF News, June 19, 2019

Source details

Press Release No. 19/224
Date: June 19, 2019
IMF mission led by Stephanie Eble visited Pristina during June 12-18 to discuss recent economic developments and Kosovo’s economic outlook.
End-of-Mission press releases convey preliminary findings after a visit. The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
IMF Communications Department — MEDIA RELATIONS — PRESS OFFICER: Gediminas Vilkas
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org

Growth is projected to remain robust at around 4 percent this year.
Key challenge: achieve higher private sector and export-led growth to reduce high unemployment and accelerate income convergence with the rest of Europe.
Current tariff on imports from Serbia and Bosnia & Herzegovina has:
- increased consumer prices, especially of food products, impacting lower income households,
- weakened the external current account.

Budget execution is broadly on track, with:
- lower revenue collection and spending overruns in social benefit schemes expected to be offset by lower capital spending.
Recent policy initiatives could increase current spending, hamper private sector development, and weaken the investment climate.
Specific fiscal risks highlighted:
- Large increase in wages as part of public administration reform, combined with an increase in employment, entails a large fiscal cost that—without measures to contain it—puts the fiscal rule at risk and undermines competitiveness.
- Social benefits under discussion (examples given):
- early retirement for the police,
- overly generous parental leave benefits.
- A proposed minimum wage hike that would go well beyond price, productivity, and wage developments carries significant fiscal costs.
Government guarantees should be carefully reviewed so as not to put fiscal sustainability at risk.

Policies should focus on closing sizable human and physical capital gaps by investing in:
- education,
- health,
- infrastructure.
Other recommended priorities:
- Restructure public enterprises.
- Enhance implementation of high-quality and donor-financed investments.
- Accelerate education reforms.
- Strengthen the rule of law and the business climate.
- Advance long overdue war veteran reforms to free up space in the budget for pro-growth spending.
Warning: Costly policy initiatives (wage increases, expanded social benefits, minimum wage hike) would also hamper private sector development by impeding efforts to reduce unemployment and informality.

“The key challenge for the Kosovo economy is to achieve higher private sector and export-led growth.”
“While growth is projected to remain robust at around 4 percent this year, it is not enough to reduce unemployment and accelerate income convergence with the rest of Europe.”
“Instead, the authorities need to move ahead with the restructuring of public enterprises; enhance the implementation of high-quality and donor-financed investments; accelerate education reforms; strengthen the rule of law and business climate; and advance long overdue war veteran reforms to free up space in the budget for pro-growth spending.”

International Monetary Fund — IMF Staff statement on June 19, 2019

Stafi i FMN-së përmbyll vizitën në Kosovë
- Stafi i FMN-së përmbyll vizitën në Kosovë (Markdown version)
- Stafi i FMN-së përmbyll vizitën në Kosovë (PDF)