IMF board approves agreement with Kosovo

The IMF reports that Kosovo is the first country in Europe to receive financing.

After a strong recovery from the COVID-19 pandemic, the increase was moderated in 2022, and inflation accelerated to biiffy levels largely due to the rise of international goods prices caused by Russia's war in Ukraine.

The negative shock of trade conditions negatively affected available household income and business profit.

Low public investments and tighter financial conditions also contributed to the weaker growth.

Authorities adequately eased the crisis, while rebuilding fiscal and international reserves.

The financial sector has coped well with successive shocks and troubled loans remain low.

Addressing long-term structural issues, such as closing infrastructure and governance gaps, reducing Kosovo's dependence on coal and promoting energy efficiency, remain crucial to making the medium-term growth higher and greener, and reducing Kosovo's support in diaspora flows, RTKlive reports.

The IMF-backed programme under the FAB will ease materialisation of negative risks and support structural reforms to strengthen fiscal and financial governance and increase growth.

The agreement will expand Kosovo's fiscal space for easing climate change and adaptation efforts, exploit synergies with other official support, and help catitulation private investments in green energy.

Following the discussion of the Executive Board, Gita Gopinath, First Deputy Managing Director and Board Chief Leader's Task Agent, welcomed the agreement.

“I am pleased that the IMF Executive Board has approved two new arrangements of the Fund for Kosovo, including a Stand-by Agreement and an agreement on the basis of easing stability and stability ʹ the first in Europe”, she said.

After successful overcoming the challenges posed by the pandemic COVID-19, Kosovo's growth in 2022 eased from the consequences of Russia's war in Ukraine.

The higher and more unstable prices of goods sparked inflation and the negative shock of trade conditions negatively affected available revenues.

The authorities' prudent fiscal policies and the widely targeted support framework helped rebuild fiscal space by easing the impact of the cost of living crisis.

Now a strong mix of policies is needed to support the recovery and achieve reform goals.

Respecting the ceiling of the deficit of fiscal rules will provide a moderate impulse to activity in 2023, helping the economy to soften, while contributing to loading public debt in the medium term.

In addition, budget expenditures should set a better balance between social transfers and promotion of economic transformation, the size of total accommodation must be reduced and the inhalation of public investments should be increased, strengthening public investment management.

Increasing financial sector governance will require strengthening central bank governance and strengthening the central bank's capacity for supervision of the financial sector.

Increasing the medium-term growth prospects and reducing the country's dependence on diaspora flows will require advancing structural reform agenda and closing infrastructure and governance gaps. Moreover, making growth greener requires reducing Kosovo's dependence on coal and increasing energy efficiency.

In this context, the IMF-backed programme under the SBA which authorities aim to address as preventative in view of the lack of a balance of payments on the basis of CHA will ease materialisation of negative risks, while policy actions will improve fiscal and financial governance and growth growth.

“Other way, RSF ease of Resistance and sustainability ( The IMF's RSF-program will support actions to smooth down and adapt to climate change, exploit synergies with other official support and help cataliise private investments in green energy. RSF closely coincides with Kosovo's new Energy Strategy for 20235032, which was approved by Parliament at the beginning of 2023<18x1>, the IMF communiqué said.