Press Release No. 13/82

Press Release: IMF Mission Reaches Staff-Level Agreement on Third Review Under the SBA with Kosovo

March 18, 2013

An International Monetary Fund (IMF) mission, led by Mr. Johannes Wiegand, held discussions with the Kosovar authorities during March 5-18, 2013, as part of the third review of the country’s economic performance under the Stand-By Arrangement (SBA). 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 third review under the SBA. Consideration by the IMF’s Executive Board is tentatively scheduled for late April. The completion of this review will enable Kosovo to draw SDR 4.251 million (about €5 million). However, the Kosovar authorities intend to treat the arrangement as precautionary in 2013, and therefore plan to not draw this amount.

“Macroeconomic and financial policies remain broadly on track. Most end-December quantitative performance criteria and applicable structural benchmarks were met. The target on the primary fiscal balance was missed by a minuscule amount (less than €1 million), as a shortfall in revenue collection related to slower-than-expected growth was not fully compensated by spending restraint. Fiscal developments in early 2013 have been in line with the targeted path of budget execution. Looking ahead, the authorities and the mission finalized legal amendments of a rules-based framework that is expected to be submitted to the assembly before the end of this month, and would anchor fiscal policy from 2014.

“Kosovo’s economy has slowed, in line with developments in Europe, but continues to display growth rates above those of most neighboring countries. Growth is expected to remain subdued but resilient also in 2013. Inflation remains contained. The banking system continues to be stable and liquid, despite some increase in non-performing loans.

“Nevertheless, risks remain, including a possible deterioration in labor market conditions in the host countries of Kosovo’s Diaspora. In this challenging environment, disciplined fiscal management, safeguarding an adequate level of government bank balances, prudent financial supervision by a strong and independent central bank, and structural reforms to boost competitiveness remain critical to support macroeconomic stability and growth.

“The mission is grateful to the authorities for their excellent cooperation, open and candid discussions, and warm hospitality.”