Kosovo considers debt write-off

By bne IntelliNews February 6, 2015

Clare Nuttall in Bucharest -


The Kosovan government is considering following the examples of Croatia and Macedonia in launching a debt write-off. The move, which would apply to debts dating from before independence in 2008, appears to be an attempt to soothe growing tensions within the country.

The government agreed on February 5 to set up an executive commission to review the possibility of forgiving debts incurred before December 31, 2008. As well as individuals, the commission will consider writing off the debts of companies, including state-owned enterprises, and state institutions.

2008 is the year when Kosovo, which broke away from Serbia after a war of independence in 1998-1999, became independent. So far the country has been recognised by 108 countries worldwide, but Serbia remains adamant it will not recognise its former province.

Preliminary estimates of debts to government agencies and utilities companies will be drawn up within a month, a government statement said.

“We see that it is necessary to have a fresh start now with the new government, to leave the past, and to deal with the future," said Finance Minister Avdullah Hoti told journalists after the government meeting.

"We will also consider that after 31 December 2008, to review the possibility to forgive the penalties and interest on debts that citizens and businesses have not paid during this period, in order to have a new beginning, of doing business and better life in the Republic of Kosovo," Hoti added.

The move comes at a time of heightened tensions within Kosovo, which in late January saw the worst unrest since independence. This has put pressure on Kosovo’s new government, which took office in December, following six months of political deadlock. Three opposition parties had expected to form part of the new government alongside Mustafa’s Democratic League of Kosovo (LDK). However, in an attempt to break the deadlock, the LDK instead struck a coalition deal with the Democratic Party of Kosovo, which has been in power since independence.

Mass protests took place in Pristina on January 24 and 27, with violent clashes breaking out between protesters and police. Police were attacked with rocks and Molotov cocktails on January 27, according to a government statement, and newswires reported that at least 37 people were injured.

Protesters demanded the sacking of Aleksandar Jablanovic, one of three ethnic Serb ministers in the Kosovan government. Jablanovic angered many Kosovans when he slammed a group of Albanians who tried to stop Serb pilgrims visiting a monastery during Orthodox Christmas as “savages”.

On February 3, Prime Minister Isa Mustafa announced that Jablanovic had been removed from the post of communities minister, promoting opposition leaders to call off the protest planned for the following day.

While Jablanovic’s sacking has pleased many Kosovans, it has angered the country’s Serb minority. Fellow Serbian ministers within the Kosovan government have threatened to withdraw in solidarity. Members of the Serb list were not present at the February 5 parliamentary session.

Tensions also increased in mid-January as the parliament prepared to vote on a new law on public enterprises, which would have paved the way for Pristina to take over the giant Trepca Mining, Metallurgical and Chemical Combine, on November 19. The move was fiercely opposed by Kosovan Serbs as well as the Serbian government, which also claims ownership of the Trepca complex. Prime Minister Isa Mustafa backed down at the last minute, informing the parliament on the day of the vote that the draft law had been removed from the agenda.

While the recent clashes had an obvious ethnic motivation, poverty, corruption and high unemployment are is also at the root of the unrest in Kosovo, one of Europe’s poorest countries. According to the UN, around 30% of the population were living in poverty as of November 2014.

Pristina’s consideration of a debt-write off follows steps in two other former Yugoslavian countries to lift the debt burden from vulnerable citizens.

On February 2, Croatia launched a scheme to write off around HKR2.1bn (€273mn) of debt owed by its poorest citizens. Debts of up to HRK35,000 will be written off for social security recipients and low-income households earning less than HRK1,250 a month. Property owners and those with savings will not be eligible for the debt write off. Around 60,000 Croatians are expected to benefit from the move, adopted in advance of parliamentary elections towards the end of this year, with creditors footing the bill.

The write off applies to bank debts as well as outstanding debts to state-utilities companies and state broadcaster HRT. Creditors including banks, utilities, telecoms companies and several municipal governments have signed agreements with the governments to write off money owed by Croatia’s poorest citizens. On January 28, the government also decided to include the tax administration in the write-off scheme.

As in Kosovo, there was a compelling political motive for the Croatian debt write-off. Parliamentary elections are due to take place in Croatia at the end of this year, and the defeat of its candidate, incumbent Ivo Josipović, in the recent presidential elections has put the ruling Social Democrat party on the defensive. The party is now looking for ways to rally support and take the focus off the country’s six-year recession.

By contrast, in Macedonia, the first country in the region to carry out a debt write-off, the VMRO–DPMNE had recently won a double victory in the April presidential and parliamentary elections. Nonetheless, in September Skopje launched its programme to write off the debts of the country’s poorest citizens after striking agreements with banks and major companies including state television broadcaster MRT. Vulnerable citizens including the disabled, long-term unemployed and recent widows and widowers were eligible for the debt write off.

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