The Governor of the Central Bank of the Republic of Kosovo, Mr. Fehmi Mehmeti received in a meeting the Prime Minister of the Republic of Kosovo, Avdullah Hoti and the Minister of Finance, Hykmete Bajrami.
Governor Mehmeti expressed his gratitude to the Prime Minister and the Government for the commitment and support given to the CBK and the financial system of Kosovo, while expressing full readiness of the institution he leads to, as it has done in the past and will continue to do so in the future, support the economic policy of the Government of Kosovo and act in accordance with the principle of open market economy with free competition, thus favouring an efficient allocation of resources.
The banking sector before the pandemic was very stable, which has helped overcome economic difficulties during the first phase of the pandemic.
At the end of February 2020, banks had high levels of capital adequacy and liquidity, whereby such stability was the result of good management and prudent supervision over the years.
In the press conference after the meeting, the Governor noted CBK's commitment since the beginning of the pandemic whereby it activated the Work Continuity Team, which met twice a week or more frequently, depending on the need to ensure the functioning of all working processes.
“The regular functioning of the payment system throughout the country is ensured at all times, including therein the regions isolated for longer periods of time. Since the beginning of the restrictive measures in March, CBK has shown high proactivity, with the instruments at its disposal, in assisting economic agents cope with the economic crisis as easily as possible. The measures taken during the emergency situation were mainly aimed at helping maintain liquidity of individuals and businesses, enabling them to defer credit instalment payments. After the emergency phase, these measures were then followed by other facilities for banks to allow crisis-affected borrowers to restructure their loans, so that borrowers under financial duress could fulfil their contractual obligations, and return to the normality of their business activity ", stated Governor Mehmeti.
He noted that CBK has been in continuous communication with international partners: the IMF, the World Bank, the European Bank for Reconstruction and Development (EBRD), as well as with the Chambers of Commerce in Kosovo and due to such continuous communications, the IMF approved the RFI (Rapid Financing Instrument) in the amount of EUR 52 million to cover urgent and temporary needs of the payment balance resulting from the COVID-19 pandemic.
The Governor also noted that after contacting the central banks of the region and together with them under the umbrella of the Vienna Initiative, and with support from the EBRD, the European Central Bank has approved the CBK’s request to establish a 'repo' financing line in the amount of EUR 100 million.
This line of funding, which is valid until 30th of June 2021, allows the CBK to borrow liquidity in euro currency from the Eurosystem, in order to address potential liquidity needs of financial institutions in Kosovo in the event of a market dysfunction due to the COVID-19 pandemic.
“During this period, the CBK has assisted the Government of Kosovo with all its professional capacities in drafting a package of economic recovery measures, and remains committed to continue giving its contribution in helping the country's economy overcome future challenges as easily as possible. Despite the current economic difficulties, the financial system remains sound and stable. The banking system is well capitalized and liquid. The capital adequacy ratio continues to be above the required regulatory minimum standing at 16.5 percent in August 2020, compared to 17.0 percent in August 2019. We have a satisfactory situation in terms of liquidity, where liquidity ratio stands at 37.7 percent. The non-performing loans rate remains low at 2.7 percent, while their provision coverage is 138.2 percent. Banks continue to credit Kosovo's economy. Total loans in August 2020 were in the amount of EUR 3.02 billion, thus continuing the growing trend during the year, with an annual increase of 7.6 percent. The amount of new loans issued for the period January-August 2020 is EUR 912.5 million, which is a decrease of 5 percent compared to the same period last year where new loans amounted to EUR 959 million. However, during July and August of this year we had promising data, where new loans granted by the banking sector amounted to EUR 320.7 million, compared to EUR 260 million of loans issued in the same period last year, thus marking an increase of 23 percent ", noted Governor Mehmeti.
He also emphasized that according to CBK's projections, the economy of Kosovo this year is expected to decline by about 7.2% which comes as a result of measures to prevent the spread of COVID-19 that negatively affected almost all economic activities in the country.
Therefore, seeing the situation, the Governor stated that in order to overcome it more easily, we need closer and better coordination of all stakeholders, particularly between the Government of Kosovo and CBK, as the institution responsible for the country's financial system.
The Governor further said that this pandemic, in addition to the short-term liquidity difficulties for businesses, will also have a long-term negative impact on a part of businesses in certain sectors.
The Economic Recovery Package is more than necessary in order to minimize negative consequences that will have a long-term impact on such sectors. The banking sector currently has sufficient financial and operational capacity to meet the financing needs of Kosovo corporations and households.
The Governor reiterated that the Government of Kosovo can rely on the support of the CBK and the entire financial system in the implementation of its general economic policies.
On the other hand, Prime Minister Hoti expressed his gratitude to Governor Mehmeti and all of CBK's staff for their commitment in fully coordinating activities, since the commencement of the pandemics.
“I believe that this coordination was for overcoming the situation, and the concrete actions taken by the CBK, i.e. creating necessary regulations for deferral of loans, loan restructuring and other appropriate regulations, allowed for the regular processing, according to the data presented by the governor, of 77 thousand requests, namely 60% of loans that were deferred. Today we discussed cooperation between the Government and CBK with regard to new economic recovery measures from January onwards, because it is more than clear that we will face this pandemic beyond December this year. By the end of December we practically supported Kosovo's economy with about 5% of gross domestic product within the Economic Recovery Fund with EUR365 million and we have allocated EUR 182 million for next year. We will design the new measures in close consultation with the CBK, as we will make maximum use of existing instruments of commercial banks, the Credit Guarantee Fund, insurance companies and other financial instruments to ensure that these funds are injected into the economy ", stated Prime Minister Hoti.
Furthermore, he informed that during the meeting they discussed in detail the assistance that the Government needs from the Central Bank of the Republic of Kosovo, the Credit Guarantee Fund, in creating the windows that this fund will support.
Also, the Prime Minister noted that they will commit, in close cooperation with CBK, to reduce the number of unregistered vehicles, so that in January, the Government together with the CBK, will commence the necessary discussions to make Kosovo part of the Green Card.
In addition, Prime Minister Hoti pledged for full engagement in pushing forward the two laws that are under procedure, and which serve to establish the necessary legal grounds for advancing the financial and banking system in Kosovo.