March 13, 2017

• Completion of review makes €100 million available.

• Arrangement extended until August to facilitate policy continuity.

• Stronger public finances have been key to the program’s success.

On March 13, 2017, the Executive Board of the International Monetary Fund (IMF) completed the second and third reviews of the Republic of Kosovo’s economic performance under the Stand-By Arrangement (SBA). The completion of the reviews enables the disbursement of SDR 79.20 million (about €100 million), which would bring the total disbursements under the SBA to SDR 135.40 million (about €172 million).

In completing the review, the Board approved the authorities’ request for an extension of the current SBA to August 4, 2017 to facilitate policy continuity and allow sufficient time for ongoing structural reforms to progress.

On July 29, 2015, the Executive Board approved a 22-month, SDR 147.50 million SBA for Kosovo (see Press Release No. 15/362 ). It supports the government’s economic program, which aims at raising Kosovo’s economic potential by creating fiscal space for growth-enhancing expenditure. Preserving low debt, upgrading key infrastructure by catalyzing donor resources, and boosting competitiveness – by realigning labor costs, removing structural obstacles to credit, and creating a more level and transparent business – environment are also program goals.

Following the Executive Board’s decision, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:

“Kosovo has performed strongly under the program. The economic recovery continues, led by robust domestic demand growth. Policy implementation has been laudable. Maintaining this momentum through the end of the program will help to lock in these gains in macroeconomic and financial stability.

“Stronger public finances have been key to the program’s success. The authorities have remained well within their fiscal deficit limit while improving budget composition. They have achieved the latter by shifting budget focus away from unproductive current spending and creating more space for much-needed, growth-enhancing capital investments. At the same time, they have significantly boosted their fiscal buffers, critical to macroeconomic stability in a unilaterally euroized country. The 2017 budget is in line with the program’s objectives and will continue to support healthy public finances, a further shift toward capital investment projects, and other measures to support durable growth.

“The authorities have also taken important steps to strengthen Kosovo’s financial safety net. Most recently, this has meant the adoption of a macroprudential policy framework, which the authorities are now operationalizing. The authorities are also working toward improving the contract enforcement system, which will allow for more efficient recovery of collateral and distressed assets and ultimately enable the bank lending that Kosovo needs to bolster stronger economic growth.

“Achieving higher and inclusive long-term growth also requires a more competitive business environment. The authorities have taken important steps in this area by intensifying efforts to mobilize donor financing for major infrastructure projects under the fiscal rule’s revised investment clause and continuing to enhance the transparency and efficiency of the public procurement system.”