Kosovo loses out on IMF funding after failing to form new government

Kosovo loses out on IMF funding after failing to form new government
By bne IntelliNews August 1, 2017

The International Monetary Fund (IMF) will shelve a final review of its stand-by arrangement (SBA) with Kosovo, as well as the final disbursement of around €15mn, because of the absence of a new regular government in the Balkan country, an IMF official confirmed to bne IntelliNews on July 31. 

In July 2015, the IMF and Kosovo signed a 22-month SBA that resulted in maintaining fiscal discipline. In March, the SBA was extended by several months to August.

Kosovo held early general elections on June 11, but their result was inconclusive with none of the three big players winning enough votes to form a government alone. 

“The final review of the SBA will not be completed, as the fourth review mission could not take place in June as scheduled. This because it is standard IMF practice not to conduct review missions around elections to preserve the Fund’s longstanding political impartiality,” Ruud Vermeulen, the IMF resident representative in Kosovo, said in an emailed statement.

“Furthermore, the mission could not take place after the elections because there is not as yet a new government in place. With the end date of August 4 approaching, the programme is now simply running out of time,” he added. 

The PAN coalition, which won the snap vote, claims it has secured the needed support of at least 61 lawmakers in the 120-seat parliament in order to form a government. It remains to be seen whether this claim is substantiated.

On July 24, President Hashim Thaci scheduled the constitutive session of Kosovo’s new parliament for August 3, but even if a new government is elected then, there will be no time for the review to take place before the programme expires, meaning Kosovo — which has received €169mn in three tranches of the SBA — will not be able to draw down the fourth and final tranche. 

“In terms of our financing, the expiration of the programme means that the final disbursement of about €15 million will not take place as the fourth and final review of the programme could not be concluded,” Vermeulen said. 

According to data from Kosovo’s finance ministry, Kosovo’s public debt was €942.7mn at end-March, and the debt to GDP ratio was 15%. Kosovo has a significant international public debt (€463.4mn at end-March), which is almost entirely owed to international financial institutions, including the International Bank for Reconstruction and Development (IBRD, €164mn), the International Monetary Fund (IMF, €201.5mn), Germany’s KfW (€53mn), the International Development Association (IDA, €38.3mn) and the Islamic Development Bank (€0.1mn). The remaining €6.5mn was owed to UniCredit.