{
  "title": "IMF Executive Board Concludes Article IV Consultation with Kosovo",
  "publication": "IMF News, February 2, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/02/02/pr1835-kosovo-imf-executive-board-concludes-article-iv-consultation",
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  "summary": "Kosovo has made significant progress since the 2015 Article IV consultation in ensuring fiscal discipline and strengthening the financial sector.",
  "publishDate": "2018-02-02",
  "sections": [
    {
      "heading": "Main findings: macroeconomic performance and outlook",
      "content": "- Kosovo has made significant progress since the 2015 Article IV consultation in ensuring fiscal discipline and strengthening the financial sector.\n- Fiscal deficit has been kept well below the 2 percent of GDP fiscal rule ceiling.\n- Government bank balances are now above the minimum level of 4.5 percent of GDP.\n- Public debt remains low.\n- Banks remain healthy and credit growth has increased.\n- Medium-term growth is projected at around 4 percent.\n- The trade deficit is expected to remain high, though on a declining path, and largely funded by non-debt creating inflows (remittances and FDI).\n- Kosovo notified the IMF on January 11, 2018 that it has accepted the obligations of Article VIII, Sections 2, 3 and 4 of the IMF's Articles of Agreement."
    },
    {
      "heading": "Structural challenges and policy priorities",
      "content": "- Key structural constraints:\n  - Weak external competitiveness.\n  - High informality.\n  - Low labor force participation.\n  - High unemployment, particularly among young workers.\n  - Large infrastructure gap.\n- Policy priorities recommended by Executive Directors:\n  - Accelerate structural reforms to boost productivity and private sector development.\n  - Address high informality and unemployment, especially youth unemployment.\n  - Reform the education sector and enhance labor market functioning.\n  - Foster a business‑friendly environment and improve governance.\n  - Strengthen the anti‑corruption regime and implement procurement reforms.\n  - Ensure prudent income policies; any increases in the minimum wage should be in line with the current rule‑based minimum-wage‑setting mechanism.\n  - Reform war veteran benefits."
    },
    {
      "heading": "Fiscal policy and public investment",
      "content": "- Directors commended continued budget discipline and adoption of the 2018 budget aligned with the fiscal rule.\n- Recommendations on public finances:\n  - Continue budget composition that creates fiscal space for growth‑enhancing spending in education, health, and infrastructure without compromising capital spending.\n  - Avoid large current spending increases.\n  - Broaden the revenue base by strengthening tax administration.\n  - Bolster the public investment framework to accelerate absorption of IFI financing for capital projects."
    },
    {
      "heading": "Financial sector and regulatory measures",
      "content": "- Progress noted in strengthening the financial sector and reducing structural impediments to bank lending.\n- Directors encouraged:\n  - Maintain reform momentum and further strengthen the supervisory framework.\n  - Continue improving access to credit while carefully monitoring developments in the real estate sector.\n  - Further enhancements to the AML/CFT framework.\n  - Improve the performance of the insurance sector.\n- Kosovo’s acceptance of Article VIII obligations was welcomed as a positive signal to investors."
    },
    {
      "heading": "Key statistics and indicators (2015–2018)",
      "content": "- Population: 1.8 million\n- Quota (current): SDR 86.2 million\n- Main products and exports: Minerals, base metals, agricultural and food products\n\n- Real GDP growth (percent)\n  - 2015: 4.1\n  - 2016: 4.0\n  - 2017: (Act.) 4.0\n  - 2018: (Proj.) around 4 percent (text: \"around 4 percent\")\n\n- Unemployment rate 1/ (Employment)\n  - 2015: 32.9\n  - 2016: 28.7\n  - 2017: 30.5\n  - Note: 2017 is as of Q2 2017\n\n- Consumer prices (period average)\n  - 2015: -0.5\n  - 2016: 0.3\n  - 2017: 1.5\n  - 2018: 1.0\n\n- Consumer prices (end of period)\n  - 2015: -0.1\n  - 2016: 1.3\n  - 2017: 0.7\n  - 2018: 1.8\n\n- Terms of Trade (percent)\n  - 2015: 96\n  - 2016: 100\n  - 2017: 103\n  - 2018: 104\n\n- Public finance (percent of GDP)\n  - Revenue:\n    - 2015: 25.1\n    - 2016: 26.3\n    - 2017: 26.2\n    - 2018: 26.9\n  - Expenditure:\n    - 2015: 26.7\n    - 2016: 27.3\n    - 2017: 27.1\n    - 2018: 29.6\n  - Overall balance ex-PAK and ex-PAK and donor-financed capital projects (Fiscal rule)\n    - 2015: -1.7\n    - 2016: -1.1\n    - 2017: -1.8\n  - Overall balance ex-PAK\n    - 2015: -2.9\n  - Public debt (end of period) 2/\n    - 2015: 18.9\n    - 2016: 19.6\n    - 2017: 21.0\n    - 2018: 21.8\n  - Stock of government bank balances\n    - 2015: 3.5\n    - 2016: 4.9\n    - 2017: 4.5\n\n- Money and credit\n  - Credit to the private sector (eop, percent change)\n    - 2015: 7.3\n    - 2016: 10.3\n    - 2017: 10.5\n    - 2018: 10.1\n  - Effective bank lending rate (end of period) 3/\n    - 2015: 7.7\n    - 2016: 7.2\n    - 2017: 6.4\n    - Note: 2017 is as of July 2017\n\n- Balance of payments (percent of GDP)\n  - Current account balance:\n    - 2015: -8.7\n    - 2016: -8.9\n  - Foreign direct investment:\n    - 2015: 4.7\n    - 2016: 3.0\n    - 2017: 5.0\n  - Reserves in months of imports:\n    - 2015: 2.9\n    - 2016: 3.1\n    - 2017: 3.3\n  - External debt stock (percent of GDP) 2/\n    - 2015: 24.7\n    - 2016: 24.5\n    - 2017: 24.9"
    },
    {
      "heading": "Executive Board assessment (summary of Directors' views)",
      "content": "- Directors welcomed strong economic performance and progress under the recent Stand‑By Arrangement to advance macro‑financial stability through fiscal discipline and financial sector reforms.\n- Directors stressed that continued commitment to sound policies and reforms is key to achieving durable and inclusive growth and improving prospects for income convergence with regional peers.\n- Directors urged prioritization of reforms in education, labor markets, governance, procurement, anti‑corruption, and prudent income policies to improve competitiveness.\n- Directors emphasized the need to broaden the revenue base, protect capital spending, and accelerate absorption of IFI-financed investment.\n\nIMF Press Release No. 18/35, February 2, 2018.\n\n---\n\n\n References\n\n- Republic of Kosovo and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/02/02/pr1835-kosovo-imf-executive-board-concludes-article-iv-consultation"
    }
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    "Published: February 2, 2018",
    "Kosovo has made significant progress since the 2015 Article IV consultation in ensuring fiscal discipline and strengthening the financial sector.",
    "Fiscal deficit has been kept well below the 2 percent of GDP fiscal rule ceiling.",
    "Government bank balances are now above the minimum level of 4.5 percent of GDP.",
    "Public debt remains low.",
    "Banks remain healthy and credit growth has increased.",
    "Medium-term growth is projected at around 4 percent.",
    "The trade deficit is expected to remain high, though on a declining path, and largely funded by non-debt creating inflows (remittances and FDI).",
    "Kosovo notified the IMF on January 11, 2018 that it has accepted the obligations of Article VIII, Sections 2, 3 and 4 of the IMF's Articles of Agreement.",
    "Key structural constraints:",
    "Policy priorities recommended by Executive Directors:",
    "Directors commended continued budget discipline and adoption of the 2018 budget aligned with the fiscal rule.",
    "Recommendations on public finances:",
    "Progress noted in strengthening the financial sector and reducing structural impediments to bank lending.",
    "Directors encouraged:",
    "Kosovo’s acceptance of Article VIII obligations was welcomed as a positive signal to investors.",
    "Population: 1.8 million",
    "Quota (current): SDR 86.2 million",
    "Main products and exports: Minerals, base metals, agricultural and food products",
    "Real GDP growth (percent)",
    "Unemployment rate 1/ (Employment)",
    "Consumer prices (period average)",
    "Consumer prices (end of period)",
    "Terms of Trade (percent)",
    "Public finance (percent of GDP)",
    "Money and credit",
    "Balance of payments (percent of GDP)",
    "Directors welcomed strong economic performance and progress under the recent Stand‑By Arrangement to advance macro‑financial stability through fiscal discipline and financial sector reforms.",
    "Directors stressed that continued commitment to sound policies and reforms is key to achieving durable and inclusive growth and improving prospects for income convergence with regional peers.",
    "Directors urged prioritization of reforms in education, labor markets, governance, procurement, anti‑corruption, and prudent income policies to improve competitiveness.",
    "Directors emphasized the need to broaden the revenue base, protect capital spending, and accelerate absorption of IFI-financed investment.",
    "[Republic of Kosovo and the IMF](http://www.imf.org/external/country/UVK/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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