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IMF, Kosovo Reach Staff-Level Accord on Standby Loan Program

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March 5 (Bloomberg) -- The International Monetary Fund reached a staff-level accord with the Kosovar government on a 107 million-euro ($141.3 million) standby loan agreement, the Washington-based lender said.

The IMF board may decide on the agreement at the end of April, it said today in an e-mailed statement, 10 months after discontinuing a program over an excessive wage bill that the government adopted with the 2011 budget.

Kosovo ended last year with full-year economic growth of 5 percent and a fiscal gap amounting to 1.8 percent of gross domestic product, less than the 2.9 percent limit outlined in the program.

Fiscal policy will remain the focus of the new 20-month program, with the lender pointing to further fiscal consolidation “aiming at a sustainable budgetary stance in two years” as the key, Authorities should consider introducing a “legally binding fiscal rule” in the longer run to ensure stability, it said.

The IMF sees economic growth in the former Serbian province at 3.8 percent this year, or 0.2 percentage points below last November’s estimate of 4 percent growth.

The forecast reflects concern about “a possible deterioration in labor market conditions in central European countries where most of the Kosovar diaspora lives,” which may “negatively affect” foreign direct investment and remittances, it said.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

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

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