IMF Agrees With Kosovo on $6.5 Million Tranche as Growth Slows

The International Monetary Fund agreed with Kosovo to release a 5 million-euro ($6.5 million) tranche of a standby loan as the Balkan nation’s economy slows amid the debt crisis in Europe.

The IMF’s Executive Board will probably consider approving the package in April, the Washington-based lender said today in a statement. Kosovo officials intend to treat the arrangement as a precautionary loan for 2013, meaning they don’t plan on drawing the funds, according to the statement.

Kosovo’s economy “continues to display growth rates above those of most neighboring countries and is expected to remain subdued but resilient” in 2013, IMF mission chief Johannes Wiegand said, according to the statement. Even though the banking system is stable and liquid, “risks remain, including a possible deterioration in labor market conditions in the host countries of Kosovo’s diaspora.”

The economy of the Balkan country, which declared independence from Serbia five years ago, is driven by remittances from Kosovars living in European countries such as Germany and Switzerland. Gross domestic product is forecast to expand around 3 percent this year, the IMF said in December.

“In this challenging environment, disciplined fiscal management, safeguarding an adequate level of government bank balances, prudent financial supervision by a strong and independent central bank, and structural reforms to boost competitiveness remain critical to support macroeconomic stability and growth,” the IMF said in today’s report.

Kosovo is set to resume talks with Serbia on March 20 as both nations aspire to accelerate their path toward European Union membership. Serbia’s Prime Minister Ivica Dacic will meet his Kosovar counterpart Hashim Thaci “to normalize relations” between the two sides, EU foreign policy chief Catherine Ashton said earlier this month.

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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