Credit interest rates expected to rise again

According to economic experts, eventual growth from the ECB will necessarily be reflected in Kosovo's banking system, as most financial institutions in the country function with foreign capital and have contracts related to European banks.

Kosovo Bank Association chief executive head Petrit Balija has told Radio Free Europe that credit interest rates will be the first to be affected.

The “can only affect loans that are at a variety of [various] interest rates and new loans, while fixed-standard loans do not change conditions”, he has said.

How much interest rates can increase on credit, Balija has no answer.

Inflation has increased the world's elsewhere initially because of market disorders that have caused the pandemic and the coronary and then because of the Russian invasion of Ukraine. To control inflation, the European Central Bank has aggressively raised interest rates, bringing them from zero to mid-2022 to 3.5 percent in March of this year.

Consequently, interest rates have also increased in Kosovo. According to the Kosovo Central Bank (BQK), they have increased from 5.8 percent to the same period this year in February of last year.

Economics Professor at the University of Pristina, Medi Bektashi, has said that the eventual growth of interest rates from the ECB would automatically increase the interest rates of new loans in Kosovo, but, as he said, it could affect active loans.

According to him, citizens or businesses that currently have loans should look into contracts whether they are at a fixed rate or at a variable rate that is related to Euribor's movements.

Eurbor is the average interest rate, under which European banks receive funds from one another. When the ECB increases the interest rate on credit, Euribor increases.

“According to laws in force, not only in Kosovo, but also in the states of the European Union, if the average rate of Euribor is envisioned, every three months should become re-evaluation... and in this case, the remaining lenders must also pay the remaining loan at the highest interest rate [if it grows]”, Bektashi has said.

Eurybor has increased rapidly last month, reaching 3.8 percent on April 27, up from 0.4% in March last year. In Kosovo 12 commercial banks operate, nine of which are foreign-owned.

Kosovo Central Bank and commercial banks have not responded to REL's interest if interest rates are raised.

The value of loans in Kosovo's 12 commercial banks has reached 4.3 billion euros, marking an annual increase of 15.1 per cent compared to the same period in 2022.

Based on the laws and regulations in power, commercial banks in Kosovo individually define interest rates based on their business policies, and the CEC cannot interfere with them.

In addition to commercial banks, 30 microfinance institutions operate in Kosovo, which also provide loans to citizens. Although with fewer criteria, their interest rates are higher than 20%. / REL