Public debt opportunities to save the economy

According to the Central Bank, Kosovo's economy in 2020 marked a decline of up to 4 percent.

Former Economy and Finance Minister Haki Shatri tells Radio Free Europe that Bruto Product levels have been returned to the level of 2018. According to him, BPV is not 7 billion euros, but 6.5 billion, which is going back.

For a return of the economy to the first levels of pandemic, Shatri adds, it would be enough around 1.5 billion euros.

These tools from personal resources are difficult to find, since the accumulated capacity is low. We can share 500m euros from the budget, no more. But since there is room for taking public debt, we need to be guided that way”, he says.

Shatri says that the introduction to any public debt should be done with a physical program that would reason on the loan request before financial institutions.

“If you don't go with such a well prepared program, no one will allow the loan, because they want to have the secure lender, so that their means can be returned to the previous”, Shatri adds.

Public debt, 1.5 billion euros
Government measures to address the crisis caused by the pandemic COVID-19 have contributed to the increase in public debt. According to Kosovo Central Bank data, public debt has reached 1.5 billion euros.

The increase in public debt is attributed to an increase in domestic debt of 21.5 per cent (which has reached 961.9m euros), and an increase in public debt of 28.6 per cent, reaching 525.8m euros.

As a percentage of the local Bruto Product, public debt amounted to 21.8 percent from 17.5 percent in December 2019.

The Law on Public Debt in Kosovo says that in no case the unpaid total debt should exceed 40 per cent of Bruto Local Product.

General debt is defined as “the total of state debt and municipal debt, taken on behalf of central government institutions, which the Republic of Kosovo is obliged to pay”.

Kosovo's economy at first levels of pandemic returns in 2022
Regaining the economy to the first levels of pandemic, even according to the World Bank, takes years. The BB in the latest report released in April points out that Kosovo's economy at the first levels of pandemic returns in 2022.

The recovery, according to the World Bank, will be guided by an increase in exports and consumption, while economic growth is projected to remain at over 4 percent in the medium term.

But, according to analyses that the Kosovo Business Alliance has done during this time Kosovo's economy, it is said that major damage has been created in the economy and that recovery takes at least three years.

Kosovo Business Alliance Chairman Agim Sahini says the only way for economic recovery is to enter public debt, but that for that too, he stresses development projects are required.

The odds of turning into the 2019 economy are small, with the trend heading towards economic recovery. There are lack of funds, lack of readiness of Kosovo state institutions to help the economy. If this trend continues, Kosovo's economy will take another three years to return to 2019”, Sahin says.

The year 2019, which marks the year before the Corleone pandemic, was completed with a growth of 4.2 percent, which is estimated to have been insufficient to address the problem of about 30 percent of Kosovo's unemployment.

Even the Central Bank of Kosovo, in its latest report, noted that the economic shock prompted by the spread of pandemic, was the highest ever in Kosovo's economy.

The preliminary estimates of the Kosovo Statistics Agency for the average growth of Bruto Local Product in 2020 suggest a 3.9 percent decline.

Economic activity, meanwhile, is expected to be restored towards the first levels of the pandemic crisis, with an annual growth of 4.3 percent during 2021 respectively.

But these expectations are subject to major uncertainty related to the length of pandemic and the degree of restrictive measures, the anti-vaccination program COVID-19, the private sector's ability to adapt business models to conform new circumstances, and so on.