The Executive Board of the International Monetary Fund (IMF) today approved a 20-month Stand-By Arrangement (SBA) for Kosovo in a total amount equivalent to SDR 90.968 million (€ 106.6 million or US$140.8 million) in support of the government’s economic program for 2012–13. The Board’s decision immediately enables the initial disbursement of an amount equivalent to SDR 4.251 million (about € 5 million or US$6.6 million). The approval of the SBA follows the successful completion of a Staff-Monitored Program between June-December 2011.
Following the Executive Board discussion on Kosovo, Ms. Shafik, Deputy Managing Director and Acting Chair, said:
“The Fund-supported program comprehensively addresses Kosovo’s macroeconomic challenges through policies and reforms to restore fiscal sustainability, re-build government cash buffers, strengthen the fiscal framework, and preserve financial stability. Determined program implementation, backed by broad political support, will be crucial to build confidence and credibility in the policy framework. In this regard, the strong track record of policy implementation under the staff-monitored program in 2011 is encouraging.
“Fiscal policy is the main instrument to safeguard macroeconomic stability. A sustainable fiscal stance should be restored by 2014, through restraint on current spending and growth-friendly revenue measures. However, priority capital and social spending should be protected. Careful prioritization, design, and costing of spending initiatives are pivotal to support this effort. Kosovo’s policy framework could be usefully complemented by a legally-binding fiscal rule to anchor fiscal policy.
“To safeguard financial stability, the central bank needs the full toolkit of legal, regulatory, and financial instruments and the ability to use these instruments without interference. Important steps have been taken, including the upgrading of the legal framework for banking regulation and supervision.
“To strengthen external competitiveness and boost economic growth, further reforms are needed to enhance the business climate, preserve labor market flexibility, develop the traded sectors of the economy, and upgrade public infrastructure.”