WASHINGTON, DC – April 11, 2020(GNP): The Executive Board of the International Monetary Fund (IMF) today approved SDR 41.3 million (around US$ 56.5 million or Euro 51.6 million, 50 percent of quota) in emergency support for the Republic of Kosovo under the Rapid Financing Instrument (RFI) to meet urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The RFI provides rapid and low-access financial assistance to member countries facing an urgent balance of payments need, without the need for a full-fledged economic program or reviews. It can provide support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations. Financial assistance under the RFI is provided in the form of outright purchases.
The COVID-19 pandemic and the associated containment measures have severely weakened Kosovo’s economic outlook. The economy is expected to contract by 5 percent in 2020 as tourism receipts, remittances, exports of goods, and FDI will decrease due to travel restrictions and the effect of COVID-19 in trading partners and remittance-originating countries. The deteriorated economic outlook is expected to result in external and fiscal financing gaps.
The authorities’ policy response to the shocks has been timely and appropriate, with a temporary loosening of fiscal and financial policies. Fiscal actions so far target the sectors most affected by the shock and aim at supporting social and health spending.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
“The global COVID-19 pandemic has adversely affected Kosovo, creating an urgent balance of payments need. Externally, travel restrictions and the global recession have imposed a heavy toll on tourism, export of goods, remittances, and FDI. Domestically, heightened uncertainty and movement restrictions have disrupted supply and further constrained demand.
“In response to the COVID-19 pandemic, the authorities reacted quickly and put in place strict containment and mitigation measures to provide relief to the most impacted businesses and households, as well as created room in the budget for increased health spending. The Central Bank of Kosovo suspended loan repayments through end-April for sectors and individuals most affected by the crisis.
“As a result of these measures, the budget deficit is expected to widen and the debt likely to increase. The authorities, however, remain committed to macroeconomic stability; as long as these measures are temporary and the fiscal rule reinstated once the pandemic recedes, it is expected that the public debt will remain sustainable.
“The Fund stands ready to support Kosovo to combat the pandemic and help the economy to recover. “