REPUBLIC OF KOSOVO

Abstract

REPUBLIC OF KOSOVO

Title Page

REPUBLIC OF KOSOVO

STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX

December 20, 2021

Prepared By

The European Department

(in consultation with other departments)

Contents

  • FUND RELATIONS

  • RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS

  • STATISTICAL ISSUES

Fund Relations

(As of November 30, 2021)

Membership Status:

Joined: June 29, 2009; Article XIV.

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Latest Financial Arrangements:

Arrangements:

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Outright Loans:

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Overdue Obligations and Projected Payments to Fund 2

(SDR Million; based on existing use of resources and present holdings of SDRs):

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Implementation of HIPC Initiative: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

As of February 4, 2015, the Post-Catastrophe Debt Relief Trust has been transformed to the Catastrophe Containment and Relief (CCR) Trust.

Safeguards Assessments

The update safeguards assessment, conducted in connection with the Rapid Financing Instrument approved in April 2020 found that the CBK continues to maintain broad operational controls and all recommendations from the previous safeguards assessment have been implemented. However, the CBK Board vacancies have resulted in the lack of a quorum since June 2020 and the absence of a functioning Board poses substantial governance and oversight risks for the central bank.3 The CBK Act protects the autonomy of the central bank, and the audit mechanisms and financial reporting practices continue to be aligned with international standards. The implementation of the risk management framework is advancing.

Exchange Arrangements

The de jure and de facto exchange rate arrangements are no separate legal tender. Since unilateral adoption of the euro, this currency is a legal tender in Kosovo and circulates freely. Kosovo is not part of the euro area and the CBK is not part of the European System of Central Banks. Kosovo has accepted the obligations of Article VIII Section 2, 3, and 4, and maintains an exchange system that is free of multiple currency practices and restrictions on making of payments and transfers for current international transactions, except for restrictions maintained solely for reasons of international or national security, which have been notified to the Fund pursuant to Decision No. 144.

Previous Article IV Consultation

The last Article IV consultation was concluded on October 7th, 2020. Going forward, it is expected that Kosovo will be on a 12-month cycle.

FSAP and ROSC Participation

An FSAP mission was conducted during September 19-October 2, 2012. The FSSA included the ROSC for compliance with Basel Core Principles. Kosovo has not had a data or a fiscal transparency ROSC. A FSSR mission was completed in May 2019.

Technical Assistance

Since 1999, the Fund has provided technical assistance and policy advice to UNMIK and, since September 2008, to Kosovo. Technical assistance has centered on the Fund’s core competencies, notably in the areas of fiscal policy, the banking and payments systems, and macroeconomic statistics. Assistance has also contributed to developing key aspects of the legal and institutional framework needed for a market economy. More recently, TA has been provided on the following issues:

Statistics

  • Government Finance Statistics (November 2018; March, June and October 2019; February and November 2020);

  • Monetary and Financial Statistics (August 2019);

Fiscal Sector

  • Tax Administration – Compliance Risk Management (November 2018); Review Process of Tax Administration Reform (March 2019); Tax Administration Modernization (January 2020); Tax Debt Collection (May 2020); IT Reform Implementation (September 2020); Tax Administration Reform Progress (March 2021), Tax Audit Reform, (February 2021), Developing an independent fiscal oversight options paper (January 2021); Tax Diagnostic Mission (April 2021);

  • Public Financial Management – Medium-Term Expenditure Framework and Fiscal Management (February 2019; September 2020); Budget Costing and Fiscal Risk Management (November 2019); Fiscal Risk Disclosure (October 2020); Technical Assistance on Monitoring of Expenditure Arrears and Multi-Annual Commitments. (April 2021), Management of Fiscal Risks Related to Publicly Owned Enterprises (POEs) (March 2021);

  • Pension System Diagnostic Assessment and Policy Advisory (March 2021);

Monetary and Financial Sectors

  • Financial Sector Stability Review (January, April and October 2019); IFRS9 Implementation (July 2020); Follow up Technical Assistance on Insurance Supervision (April 2021), Central Bank Governance, (June 2021).

Resident Representative

Ms. Eble from regional office for the West Balkans took up her post on June 14, 2019 and oversees Kosovo’s local office.

Statistical Issues

(As of November 20, 2021)

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Kosovo—Table of Common Indicators Required for Surveillance

(As of November 20, 2021)

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CBK’s NFA and GIR data have been revised for the period 09/2015 – 07/2018 to exclude the CBK’s holdings of Kosovar government securities. CBK balance sheet and survey data have been revised for the period 09/2015 – 07/2018 to reclassify the CBK’s holdings of Kosovar government securities as claims on the central government.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary and extra budgetary funds) and local governments (municipalities).

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I), and not available (NA).

GNDI data not available.

1

Undrawn outright disbursements (RFI and RCF) expire automatically 60 days following the date of commitment, i.e. Board approval date.

2

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

3

The quorum was restored after two (out of three) Board vacancies were filled in November 2021.

Republic of Kosovo: 2021 Article IV Consultation-Press Release and Staff Report
Author: International Monetary Fund. European Dept.