IMF Mission to Kosovo Reaches Staff-Level Agreement on First Review of Stand-By Arrangement StatementPress Release No. 12/216
June 11, 2012
An International Monetary Fund (IMF) mission, led by Mr. Johannes Wiegand, held discussions with the Kosovar authorities during May 31-June 11, 2012, as part of the first review of the country’s Stand-By Arrangement. At the conclusion of the visit, Mr. Wiegand made the following statement:
“The mission reached staff-level agreement with the authorities on a package of policies that aims at completing the first review under the SBA. Consideration by the IMF’s Executive Board is tentatively scheduled for mid-July. The completion of this review will enable Kosovo to draw SDR 39.108 million (about €46 million). The authorities intend to deposit the funds from this purchase in the Special Reserves Fund administrated by the central bank.
“Macroeconomic and financial policies in Kosovo are on track. All end-April quantitative performance criteria and most structural benchmarks were met, although on one occasion (KSF pension law) the continuous structural benchmark on including a standard cost control clause into all new benefit creating laws was not observed. Corrective action is being taken. The end-May structural benchmark on submitting a revised Deposit Insurance Law to the Assembly is expected to be met with a slight delay.”
“Kosovo’s economy has continued to display resilience in a difficult international environment. Solid current and capital inflows and robust lending activity by a well-capitalized and liquid banking system have supported growth, while contagion from the financial crisis in the euro area has remained subdued, owing to a small export base and limited integration into cross-border financial markets. Real GDP is expected to grow by
3.8 percent this year. However, downside risks remain, as foreign direct investment and remittances from the Kosovar diaspora could be affected in case of a deterioration of labor market conditions in host countries.”
“Steadfast commitment to disciplined fiscal management, the restoration of an adequate level of government cash buffers, and the further strengthening of the legal and regulatory framework for financial regulation and supervision provide the best safeguard to steer Kosovo’s economy through the period ahead. Broad-based political support will be needed to safeguard the program’s continued success.”