IMF Executive Board Approves a New SDR 80.12 million Stand-By Arrangement and an SDR 61.95 million Resilience and Sustainability Facility Arrangement for Kosovo

IMF News, May 25, 2023

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Canonical URL: IMF Executive Board Approves a New SDR 80.12 million Stand-By Arrangement and an SDR 61.95 million Resilience and Sustainability Facility Arrangement for Kosovo

The Executive Board approved a 24-month precautionary Stand-By Arrangement (SBA) of SDR 80.12 million.
The Executive Board approved an arrangement under the Resilience and Sustainability Facility (RSF) of SDR 61.95 million.
SDR 80.12 million is described as around €100 million and 97 percent of quota.
SDR 61.95 million is described as around €78 million and 75 percent of quota.
Kosovo is the first country in Europe to receive financing under the RSF.
Press Release No. 23/180; date: May 25, 2023.

The SBA is expected to be precautionary and will provide liquidity in case downside risks materialize, including from Russia’s war in Ukraine.
The RSF will provide affordable financing to support Kosovo’s climate change mitigation and adaptation efforts, including through greener electricity production and more efficient energy use.
The RSF is expected to catalyze other climate financing and to help catalyze private investment in green energy.
The IMF-supported program under the precautionary SBA will mitigate the materialization of downside risks and support structural reforms to strengthen fiscal and financial governance and enhance growth.
The RSF arrangement will expand Kosovo’s fiscal space for climate change mitigation and adaptation efforts, exploit synergies with other official support, and help catalyze private investment in green energy.

Kosovo experienced a strong recovery from the COVID-19 pandemic; growth moderated in 2022.
Inflation accelerated to double digit levels in 2022 due mainly to the increase in international commodity prices brought on by Russia’s war in Ukraine.
The negative terms-of-trade shock adversely impacted households’ disposable income and business profitability.
Low public investment absorption, and tighter financial conditions also contributed to weaker growth.
The authorities cushioned the shock while rebuilding fiscal and international reserve buffers.
The financial sector has weathered back-to-back shocks well and non-performing loans remain low.

Closing infrastructure and governance gaps.
Reducing Kosovo’s dependence on coal.
Promoting energy efficiency.
Reducing Kosovo’s reliance on diaspora flows.
Increasing public investment absorption and strengthening public investment management.
Enhancing financial sector governance, including strengthening central bank governance and bolstering the central bank’s capacity for financial sector surveillance.

Abide by the fiscal rule deficit ceiling to provide a moderate impulse to activity in 2023, helping the economy soft land and contributing to the anchoring of public debt in the medium term.
Strike a better balance in budgetary spending between social transfers and promoting economic transformation.
Reduce the size of blanket allocations.
Increase public investment absorption while strengthening public investment management.
Strengthen central bank governance and bolster the central bank’s capacity for financial sector surveillance.
Advance the structural reform agenda to increase medium-term growth prospects and reduce dependence on diaspora flows.
Reduce dependence on coal and increase energy efficiency to make growth greener.
Treat the SBA as precautionary given the absence of a balance of payments need in the baseline.

The RSF aligns closely with Kosovo’s new Energy Strategy for 2023–32, which was approved by Parliament earlier in 2023.
The RSF is expected to exploit synergies with other official support.

Press Release No. 23/180, IMF Press center (May 25, 2023).