Last week, on November 15, the Executive Board of the International Monetary Fund (IMF) completed the first reviews of Kosovo’s 24-month Stand-By Arrangement (SBA) and its Resilience and Sustainability Facility (RSF) Arrangement. In completing the reviews, IMF management noted Kosovo’s solid growth despite global and regional headwinds, as well as the strong downward trend of inflation. IMF management also commended the very good performance under both programs. While this approval made available about €24.8 million under the SBA and around €38.4 million under the RSF arrangement, there is much more in these two programs than just financial support.
The SBA provides a safety net that helps mitigate risks of shocks—for example, higher commodity prices or changes in availability of financing. As Kosovo’s program is fully financed and the country maintains robust reserve buffers, the SBA is precautionary, that is, its financing will not be used unless these risks materialize. However, the availability of the safety net provided by the SBA contributes to stabilize economic expectations, diminish uncertainty, and cushion against potential downturns. It's a key pillar supporting the authorities’ efforts to ensure macroeconomic stability and a catalyst for policy enhancement and growth.
The SBA’s emphasis on macro-fiscal discipline and governance reforms—including strengthening tax administration, reducing informality, fostering transparency, and enhancing public financial management—is crucial for anchoring Kosovo's fiscal policy. The SBA’s support for Kosovo’s rules-based fiscal framework has allowed fiscal policy to strike a balance between providing a moderate fiscal boost while also managing inflationary pressures. It has also contributed to the government’s efforts to efficiently and effectively allocate public spending and to balance social needs with economic transformation. Going forward, Kosovo’s still-low public debt ratio provides space to bolster its economic and social infrastructure, which is critical to build the human and physical capital necessary for enduring growth. To take advantage of this space, the SBA is supporting the authorities’ efforts to enhance public investment management.
The authorities’ program supported by the SBA also strengthens governance of Kosovo’s financial sector. Despite the sector's overall resilience, global risks call for enhanced credit risk monitoring and regulatory improvements. A new Banking Law, currently being prepared, will bolster bank resolution and supervision, steps in the right direction. Work by the new leadership of the Central Bank of Kosovo to clarify roles and responsibilities of its two boards will strengthen the CBK’s performance.
Kosovo's energy and climate ambitions are both bold and realistic. Kosovo’s RSF is Europe’s first. The country’s energy strategy supported by the RSF is not just about swapping coal for renewables. It's a holistic approach to energy and climate change that encompasses reducing emissions, tackling pollution, ensuring energy security, and safeguarding vulnerable consumers.
The draft Law on Renewable Energy Sources recently approved by the government is a “game-changer”, as it sets the stage for private investment in sustainable electricity generation—a bold statement of Kosovo's commitment to environmental stewardship. Approval by the National Assembly will help achieve the goal of boosting renewable energy to 35 percent by 2031 through competitive, open, and transparent tenders. The pilot auction for 100 MW of solar-based capacity launched earlier in 2023, and the upcoming (in mid-2024) tender for 150 MW of wind-based capacity represent the first steps along that path, signaling a serious commitment to a sustainable future.
Kosovo's energy strategy is more than going green: it's about economic resilience. By improving regional cooperation and market functioning, Kosovo is working towards a more competitive electricity market, while attracting private investment and strengthening supply security. Consumer protection and empowerment, particularly through fair tariffs and energy awareness campaigns, are crucial components. Enhancing energy efficiency in homes and buildings, will also reduce the overall carbon energy footprint. Installing filters in Kosova B will contribute to better air quality and better health.
To conclude, Kosovo's strategic approach, supported by the SBA and RSF with the IMF, reflects a deep commitment to reforms and sound policies. The country's focus on sustainable growth, energy efficiency, and fiscal prudence reinforces its path to strong, sustainable development. This path calls for continued dedication to sound policies and reforms, particularly in the face of challenging global circumstances. The IMF is a keen and committed partner along the way.
(Gabriel Di Bella has been mission chief for Kosovo at the International Monetary Fund since 2019)
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