The International Monetary Fund (IMF) has extended funding to three Western Balkan countries, Albania, Kosovo and North Macedonia, to support their efforts during the coronavirus (COVID-19) pandemic. 

Bosnia & Herzegovina is also now on track to receive IMF funding after the leaders of the country’s three main ethnic parties and the state authorities reached an agreement how a much-needed €330mn loan from the IMF will be spent. 

The IMF said on April 10 it approved $190.5mn financial assistance to Albania to respond effectively to the coronavirus epidemic in the country by strengthening healthcare. The new funds are provided under the Rapid Financing Instrument (RFI), which distributes funds to countries facing an urgent balance of payments need, without the need for a full-fledged economic programme or reviews.

Albania was hit by a double whammy of the deadly earthquake last November, followed by the ongoing global coronavirus outbreak that together have caused significant losses and disruptions to the economy.

“The earthquake on November 26, 2019 and the ongoing global COVID-19 pandemic have caused significant hardship and disruption to economic activity in Albania,” Tao Zhang, deputy managing director and acting chair, said in an IMF statement.

According to Zhang, the two consecutive shocks are expected to create large fiscal pressures and an urgent balance of payments need amid a tightening of global financial conditions.

Zhang praised the Albanian authorities for adopting stringent containment measures and a fiscal package of 1.4% of GDP to help ensure medical care and support to affected households and businesses.

On the same day the IMF approved a disbursement of SDR140.3mn (about €176.53mn) which is 100% of the quota for North Macedonia to support financing health and macroeconomic stabilisation measures. As for Albania, the funds are provided under the RFI.

Zhang said that North Macedonia’s economic outlook has deteriorated substantially as a result of the epidemic and that the real GDP is seen falling by 4% in 2020 due to a fall in both domestic and external demand.

"This, together with negative shocks to confidence and spillovers from global financial channels, has created an urgent balance of payments need,” Zhang said in the statement.

He recalled that North Macedonia’s authorities took all necessary measures to offset consequences of the coronavirus epidemic and that are ready for additional measures if needed.

“The Fund stands ready to support North Macedonia to combat the pandemic and help the economy to recover,” the IMF director said.

North Macedonia’s finance ministry is also seeking fresh money from the World Bank and the European Commission to finance the economic measures it adopted to help firms and households which are affected by the crisis.

"North Macedonia can count on financial support from international organisations of about €400mn-€450mn without issuing a new Eurobond," Finance Minister Nina Angelovska said.

Economic measures adopted so far are estimated at around €200mn, but authorities are preparing other measures to offset the consequences of the crisis.

Kosovo will receive the smallest amount of funding of the three countries, €51.6mn, which is 50% percent of its quota. The funds, provided under the RFI, are aimed to help Pristina respond effectively to the coronavirus by strengthening healthcare and mitigating the effects on the sectors and households most affected by the crisis

The IMF projects that the coronavirus pandemic will hit Kosovo’s economy hard. GDP is projected to contract by 5% in 2020 as tourism receipts, remittances, exports of goods, and FDI will decrease due to travel restrictions and the effect of COVID-19 on its trading partners and remittance-originating countries. The deteriorated economic outlook is expected to result in external and fiscal financing gaps, the IMF noted.

Meanwhile, political leaders in Bosnia cleared the last condition imposed by the IMF to receive a €330mn IMF loan by agreeing on  how it will be distributed. Bosnia’s state-level government said in a statement that the Muslim-Croat Federation will receive 62% of the sum, Republika Srpska – 38%, while 0.5% will go to the autonomous Brcko district.

The decision was taken at the last minute after the IMF once again urged the authorities of Bosnia’s two autonomous entities to agree on the spending of the loan in order not to lose it. According to Klix.ba, representatives of the international community participated in the negotiations to help Bosnia get the much needed aid.

The aid is part of the IMF’s programme to help governments worldwide to tackle the coronavirus outbreak and its economic consequences. Bosnia has been in a state of disaster since March 17 and the number of reported cases of coronavirus reached 984 on April 12.

Although the aid was proposed by the IMF, it has warned that it will halt this assistance if the authorities undermine the country’s currency arrangement.

Earlier in April, Bosnia’s state-level Prime Minister Zoran Tegeltija said he had asked international financial institutions for at least €600mn joint aid to support the country's economy and healthcare system as the coronavirus crisis unfolds.