The International Monetary Fund said it approved the disbursement of 48 million euros ($59 million) to Kosovo under a standby-loan agreement as its economy remains shielded from the euro area’s debt crisis.
Once the government in the capital, Pristina, draws the funds, the landlocked Balkan country that was part of Serbia more than four years ago will have received 53.2 million euros under the accord, the Washington-based lender said in a report today. The authorities will finance the central bank’s special- reserves fund for emergency liquidity assistance to local banks, the IMF said.
“Kosovo has remained largely shielded from the euro-area crisis due to limited trade and financial links with the rest of Europe,” the IMF said in the report. The economy is forecast to expand 3.8 percent this year, supported by “robust remittances and capital inflows” that originate from Kosovars living outside the country.
Kosovo’s economy is driven by investments and cash sent from its residents living in Europe. Central bank Governor Gani Gerguri said July 13 that the 2 million mainly ethnic-Albanian nation is “lucky that the majority of its diaspora is living in Germany and Switzerland,” which have so far avoided a recession that is battering peripheral euro countries like Spain and Greece.
The aim of the $137 million IMF program, approved in April, is to restore “a sustainable fiscal position and sufficient government cash buffers, anchoring fiscal policy through the introduction of a fiscal rule and enhancing the resilience of the financial system,” the IMF said in today’s report.
Kosovo’s banking industry, dominated by Germany’s ProCredit Holding AG and Austria’s Raiffeisen Bank International AG (RBI), is well capitalized, liquid and profitable, according to the IMF. The average capital adequacy ratio of the banking system stood at 18 percent at the end of April with the share of non- performing loans at 6 percent, the IMF said.
Kosovo, like its Adriatic Sea neighbor Montenegro, has been unilaterally using the euro since 2002, providing the country with the macroeconomic stability, according to Gerguri.
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