The Central Bank of the Republic of Kosovo has welcomed the statement of the International Monetary Fund after the staff visit to Kosovo on May 10 - 20, led by the Head of the International Monetary Fund Mission for Kosovo, Mr. Gabriel Di Bella, where were discussed recent economic developments, the outlook, and policies.
This institution has assessed that the banking sector has so far weathered the recent shocks well, helped by a good regulatory framework. Strong credit growth has been supporting economic activity and domestic deposit and lending rates have remained broadly stable.
However, the IMF has estimated that tighter financial conditions in Europe could translate into higher domestic interest rates, creating vulnerabilities for sectors that have expanded strongly, including construction.
According to the IMF, banking supervision will need to continue to vigilantly monitor banks’ asset quality and liquidity, ensuring that banks preserve sufficient capital buffers.
“An independent, accountable, and fully functional central bank is critical for the stability of the financial system. The appointment of two new Board members last December restoring the quorum of the supervisory board after a year and a half was a welcome step. However, the vacant deputy governor position should be filled urgently to prevent any adverse impact on the CBK’s capacity to act or make executive decisions during these trying times” the IMF said.
The IMF has forecast that inflation will rise to over 10% this year, while price increases will reach 5.5% of Gross Domestic Product. Whereas, it was requested that sound macroeconomic policies and financial stability be maintained, as well as the advancement of the implementation of reforms, which will be essential for attracting foreign direct investment in Kosovo, at a time when many investors are moving to Europe.
Regarding the request for withdrawal of pension funds from the Pension Savings Fund, the IMF has expressed opposition, as this action according to this institution would cause a serious blow to the stability of the pension system and would strongly reduce the real value of pensions.