At the conclusion of the visit of the International Monetary Fund Mission in Kosovo, headed by Ms. Stephanie Eble, a press conference was held at the premises of the Government of Kosovo by the Minister of Finance, Mr. Bedri Hamza, the head of the International Monetary Fund Mission in Kosovo, Ms. Stephanie Eble and the Acting Governor of the CBK, Mr. Fehmi Mehmeti.
The Acting Governor of Central Bank of Kosovo, Mr. Fehmi Mehmeti thanked the International Monetary Fund, for the ongoing support to Kosovo, in particular to the Central Bank of the Republic of Kosovo, in fulfilling its task of promoting and maintaining financial stability, which is constantly increasing. Whereas, regarding the financial sector with special emphasis on banking, he announced that the financial sector and the banking sector in particular, continues to be stable, to grow both in the assets and deposits sectors, while lending has recorded a double-digit growth, being one of the important factors in boosting the country's economic development. A very positive indicator according to Mr. Mehmeti are non-performing loans, which have continued the downward trend and today the non-performing loans rate is at the level of 3.6%, which is a significantly better indicator compared to the countries of the region or even beyond. Also the financial sector continues to be well capitalized and with a very good liquidity situation. The interest rate has continued to decline, and compared to the previous years when the interest rate was two-digit rate, now the effective interest rate including businesses and households has fallen to 6.51%, and if we see the effective interest rate only for businesses is 5.87%, while the effective rate for mortgage loans ranges from 4 to 6%. So, progress has been made and this has helped to improve access to finance in the Republic of Kosovo” added the Acting Governor Mehmeti.
While, Mr. Bedri Hamza, in his speech stated “Kosovo's economy has noted progress in recent years, the economic growth is above 4% and it is among the largest in the region. If we speak as economic growth and as a percentage, it is high, but knowing the basis of Kosovo's economy, Kosovo obviously needs a larger economic growth in order to address its main challenges” stated the Minister of Finance, Bedri Hamza in his speech at today's press conference by the end of the visit of the IMF delegation. "Kosovo continues to have a macro-fiscal stability, the budget deficit for 2017 is expected to be within the fiscal rule, lower than 2%.
According to Minister Hamza, we expect to have a good execution of Budget, but above all despite the budget deficit that will be within the fiscal rule something lower than 2%, we expect to have a positive banking balance in accordance with the fiscal rule. He announced that "the IMF has helped us push forward the structural reforms, in building human capacities as a very important element for a good implementation of laws and the advancement of these human capacities, and we have of course benefited in the financial aspect as well."
Minister Bedri Hamza underlined that "We know that Kosovo ranked in top 10 reforming countries even in the World Bank Report, we are in the 40th place, but still Kosovo needs to have even greater progress in this direction, to create a good business climate, to support the private sector, where this sector will be the bearer of growth and economic development, but also for the attraction of foreign direct investment, in order to address the challenges I mentioned earlier, such as the high trade deficit and the high unemployment rate."
He announced that Kosovo needs strengthening of law and order, it is a priority of the Government of the Republic of Kosovo, and it is our need that in addition to have good laws, to implement them. "This priority is also reflected in the Budget 2018, where we have allocated more budget for this sector than in the previous years. Good governance needs to be improved, to increase efficiency, effectiveness, increase the productivity of public sector employees and justify the contract of each employee, "added Minister Hamza.
He said that "just like in the past, nowadays also, we are facing the pressure of new initiatives, especially in the part of social transfers, we know that Kosovo has many needs, but has a top priority and that is maintaining macro-fiscal stability. And we need to address and meet the needs in accordance with our real budget possibilities, otherwise, it is difficult to talk about preserving macro-fiscal stability."
Minister Bedri Hamza said that "part of this Mission has been another team that had to do with the Kosovo's assessment to move from Article 14 to Article 8. It is an advancement of this status of Kosovo because in the article 8 are included countries that have reached a level of development and rule of law, and are more advanced countries, and I believe that Kosovo has fulfilled these conditions to be part of these countries, as I said before to move from article 14 to article 8 ".
Meanwhile, the Head of IMF Mission in Kosovo, Ms. Stephanie Eble estimates that Kosovo continues to have sustained economic growth driven by investments and exports. The economic growth is expected to reach 4.1 percent in 2017, which is the highest among neighboring countries, driven by investment growth and export growth. Also, the continuous increase of remittances from the diaspora and the increase of lending by the banking sector provide support to this development.
"The fiscal aspect remains adequate from the perspective of economic development and stability," fiscal rule "is an appropriate fiscal policy mechanism. In line with the revised budget for 2017, the budget deficit (fiscal rule definition) is expected to be about 1.5 percent of GDP much below the limit of 2 percent of the fiscal rule of GDP. The 2018 draft budget targets a deficit of 1.8 percent of GDP, which is in line with the fiscal rule. The Draft Budget also keeps constant the wage bill as a part of GDP in line with the salary rule that has started to be implemented as of this year,” added the IMF Head of Mission in in Kosovo Stephanie Eble.
She also stated that "As far as the financial sector is concerned, Kosovo banks are well-capitalized, liquid and profitable, but banks' oversight can be further strengthened. In particular, the Mission welcomes the low level of non-performing loans as well as their proper provisioning.