IMF Reaches Staff-Level Agreement with the Republic of Kosovo on a Stand-By Arrangement (SBA) and a Resilience and Sustainability Facility (RSF)

IMF News, April 20, 2023

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Canonical URL: IMF Reaches Staff-Level Agreement with the Republic of Kosovo on a Stand-By Arrangement (SBA) and a Resilience and Sustainability Facility (RSF)

An IMF mission led by Mr. Gabriel Di Bella visited Pristina during March 8-24; and held follow-up virtual and in-person meetings during March 27-April 14, to discuss macroeconomic policies, the energy sector, the reform agenda, climate change mitigation and adaptation policies, and possible IMF support.
Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision. Executive Board discussions on these arrangements are expected late May.
The staff-level agreement is subject to approval by IMF Management and the Executive Board.

24-month Stand-By Arrangement (SBA) of around €100 million; expected to be precautionary and to provide liquidity in case downside risks materialize, including those arising from Russia’s ongoing war in Ukraine.
Resilience and Sustainability Facility (RSF) arrangement of about €78 million; the RSF will provide affordable financing to support climate change mitigation and adaptation, greener electricity production, and long-run growth prospects, and is expected to catalyze other climate financing. Kosovo’s RSF is the first in Europe.
Specific access figures: SDR 80 million (around €100 million, 97 percent of quota) for the SBA; SDR 62 million (around €78 million, 75 percent of quota) for the RSF.
The authorities indicated the intention to request an RSF augmentation once additional reform measures are identified, including from the upcoming Climate-PIMA (C-PIMA).

Preliminary data suggests that real GDP grew by 3.5 percent in 2022 while inflation reached more than 11 percent.
Growth is projected to pick up to 4–5 percent in 2023 as commodity prices soften and fiscal policy becomes more supportive.
Softer commodity prices are projected to bring inflation down to 5 – 6 percent in 2023.
The moderate increase in growth is projected to close Kosovo’s relatively small output gap.

Downside risks predominately include:
- An uptick in commodity prices, which could lead to lower growth and higher inflation (Kosovo is a net importer of food and energy).
- Tighter financial conditions, including due to recent bank failures in the U.S. and Europe, which may weigh on banks’ asset quality and liquidity.
Program role:
- The IMF-supported program will mitigate adverse impacts if these or other risks materialize.
Upside possibilities:
- Stronger public investment implementation may push growth higher.
- Exports of goods and services have proved very resilient and may again surprise on the upside.

Fiscal Governance
- Support to strengthen tax administration, reduce informality, enhance fiscal risk analysis, improve public financial management, and further strengthen fiscal transparency.
Financial Stability
- Support to strengthen the CBK’s policy toolkit and governance guided by the 2019 Financial Sector Stability Review (FSSR) recommendations.
Structural Challenges
- Support to close infrastructure and governance gaps, including through an update of the Public Investment Management Assessment (PIMA) and strengthening the operations of publicly-owned enterprises.
Energy and Climate Strategy
- The RSF will support climate change mitigation and adaptation efforts, including those articulated by the recently approved energy strategy for 2023-32.
- Concretely, support will target increasing the share of renewables in energy generation, decreasing pollution, strengthening regional energy integration, increasing energy efficiency, and protecting vulnerable energy consumers.
Expected catalytic effects
- The new arrangements are also expected to catalyze additional bilateral and multilateral financial support and private investment in green energy.

The IMF team held meetings with senior government officials, representatives from the private sector, civil society, and development partners during the Pristina visit.
The team expressed gratitude to the Kosovo authorities for candid and constructive dialogue and warm hospitality and looks forward to continued engagement.

Press Release No. 23/123, IMF Communications Department (April 20, 2023).

Press Release-English
- Press Release-English (Markdown version)
- Press Release-English (PDF)