IMF Reaches Staff-Level Agreement on the Fourth and Final Reviews of Kosovo’s Stand-By Arrangement and Resilience and Sustainability Facility Arrangement
IMF News, March 20, 2025
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- Authors: Arrangement, Resilience, Sustainability Facility Arrangement Press Release No.
- Published: March 20, 2025
Program and Review Outcome
- IMF staff and Kosovo authorities reached staff-level agreement on the Fourth and final Reviews under the Stand-by Arrangement (SBA) and Resilience and Sustainability Facility (RSF).
- Completion of the Reviews will make available SDR 13.35 million (€16.34 million) under the SBA and SDR 7.74 million (€9.48 million) under the RSF.
- The agreement is subject to approval by the IMF Executive Board, with Board consideration expected in May.
- The authorities intend to continue treating the SBA as precautionary, not drawing on the resources.
- Program performance: all quantitative performance criteria, indicative targets (ITs) and structural benchmarks for the Reviews have been met.
Macroeconomic Performance and Outlook
- Findings:
- Growth reached 4.4 percent in 2024 driven by private consumption and investment.
- Growth is expected to remain at 4 percent in 2025.
- Inflation fell in 2024, averaging 1.6 percent.
- The external current account deficit widened to 9 percent of GDP in 2024, up from 7.5 percent in 2023.
- After two years of elevated pressures, food and transport inflation eased in 2024.
- Risks and uncertainties:
- Outlook is favorable but is subject to uncertainty, including from international geopolitical developments.
Fiscal Policy, Public Finance, and Fiscal Buffers
- Key statistics and findings:
- Deficits were modest at 0.2 and 0.3 percent of GDP in 2023 and 2024, respectively.
- Public debt fell below 17 percent of GDP in 2024—the lowest level since 2017.
- Treasury deposits at the CBK increased to €575 million by end-2024.
- Tax-to-GDP ratio reached 26½ percent of GDP in 2024—the highest ever.
- Reforms and improvements:
- Successful fiscal reforms bolstered revenue collection.
- Transparency improved for public enterprises and key institutions, such as tax administration.
- Public financial management (PFM) reforms led to more effective execution of the public investment program.
- Policy recommendations:
- Continue implementing prudent fiscal policies anchored in a sound, rules-based framework.
- Continue revenue administration reforms to create fiscal space for increased social and capital investments.
- Continue PFM reforms to enhance the efficiency and impact of government spending.
- Maintain strong fiscal buffers and enhanced crisis preparedness amid rising uncertainty.
- EU accession efforts emphasized as key to mobilize additional financial resources to address Kosovo’s large developmental needs.
Financial Sector Reforms, Stability, and Payments Integration
- Achievements and ongoing initiatives:
- CBK implemented internal institutional reforms to boost effectiveness, efficiency, and transparency.
- CBK undergoing an IMF-led Central Bank Transparency Code (CBT) assessment and a governance audit by a peer central bank.
- Major initiatives to modernize the financial sector regulatory framework and align with EU standards.
- Ongoing adoption of the Supervisory Review and Evaluation Process (SREP) to enhance risk-based bank supervision.
- CBK is developing and operationalizing a macroprudential policy framework and strengthening crisis preparedness, including through recently-extended ECB backstop (€100 million).
- Increased premiums from banks to the Deposit Insurance Fund provided additional safety cushion.
- Integration efforts: strides to integrate with the Single Euro Payments Area (SEPA) and develop the regional TIPS Clone instant payments system.
- Launch of the Platform for Comparison of Financial Products and Services to enhance financial literacy and transparency.
- Financial sector outcomes:
- Private sector credit grew by 17 percent in real terms in 2024, peaking in 2024 and exceeding 56 percent of GDP.
- Financial inclusion improved, with bank or e-money account ownership and settlement via the Kosovo Interbank Payment System (KIPS) increasing.
- Banking sector remains profitable and well-capitalized with low levels of NPLs.
- Policy implications:
- Maintaining stability will require continued vigilance and proactive risk management.
Resilience and Sustainability Facility (RSF) and Green Agenda
- RSF-supported reforms and results:
- Reforms and implementation of the green agenda have progressed.
- Reforms implemented under the RSF facilitated efforts to double renewable energy generation capacity, improve energy efficiency and cut pollution.
- The remaining RSF reform measure—launch of the wind power tender—was implemented with a short delay.
Mission, Stakeholder Engagement, and Next Steps
- Mission details:
- IMF mission led by David Amaglobeli visited Pristina during March 12–21.
- Mission met with Deputy Prime Minister Bislimi, Minister of Finance, Labor, and Transfers Murati, Minister of Economy Rizvanolli, Central Bank Governor Ismaili, and other senior officials, civil society, private sector and international partners.
- Next steps:
- IMF Executive Board consideration of the Reviews expected in May.
- Continued implementation of agreed reforms and monitoring of end-March ITs, which are on track to be met.
Press Release No. 25/071 — IMF Communications Department — March 20, 2025