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Kosovo May Seal IMF Pact Amid Debt Crisis, Gerguri Says

Kosovo may conclude an international standby agreement worth about 110 million euros ($145 million) by the end of June as it seeks a shield from Europe’s debt crisis, central bank Governor Gani Gerguri said.

Kosovo, which declared independence from Serbia four years ago, has yet to agree on the exact amount of the accord. It first looked to the International Monetary Fund in 2010 after becoming the Washington-based lender’s 186th member. So far, aid isn’t needed as the economy is set to expand 3.8 percent this year, Gerguri said, though the growth outlook was revised lower from 5 percent.

“We are confident in our growth outlook because even within the euro zone, which is experiencing a serious crisis, we are mainly linked to Germany and Switzerland for remittances,” said Gerguri in an interview yesterday in the capital Pristina. “We are lucky that they are the best performers in Europe.”

The landlocked former province, wedged between Serbia, Montenegro, Albania and the Republic of Macedonia, relies on foreign investments, exports and money from Kosovars living elsewhwere in Europe to drive an economic expansion that averaged more than 4 percent since 2005. The Finance Ministry plans to raise about 74 million euros in Treasury bill sales this year to finance spending, the central banker said.

“Our financing gap for 2012 is between 150 million euros and 160 million euros and we will cover it with the issuance of government securities and with the loan agreement with the IMF,” Gerguri said.

Soaring Joblessness

Even with growth higher than other countries in central and eastern Europe, Kosovo is beset by a jobless rate as high as 40 percent and a large trade deficit as imports outpace exports, resulting in a current-account gap of about 25 percent of gross domestic product, the highest among the former Yugoslav nations, according to IMF data.

Kosovo has used the euro unilaterally since 2002 and concerns about a euro-region breakup prompted the central bank to move its 1.1 billion euros in assets from securities of periphery countries like Greece, Ireland and Italy to core nations like Germany, France and Luxembourg, the central banker said.

“Our stance now is that the euro will survive as benefits of keeping the European common currency outweigh any shortfalls,” he said.

Recognition of Independence

Kosovo declared independence in 2008 almost a decade after North Atlantic Treaty troops drove Serbian troops under then-leader Slobodan Milosevic out of the province. Serbia still refuses to recognize Kosovo along with five of the European Union countries. The U.S., U.K., Germany and more than 80 other nations treat Kosovo as an independent country.

Tensions between Serbia and Kosovo that erupted in violence in July over the Serb-controlled north of the country eased after both nations reached a compromise on regional cooperation and on the implementation of the integrated management for border crossings, the EU said last month.

That enabled Serbia, the largest ex-Yugoslav republic, to win candidate status to join the EU and eventually start a multi-year process that comes with no guarantee of admission.

“A normalization of relations should result in a positive outcome,” Gerguri said. “Serbia approaching the EU is a win-win situation for all its neighbors.”

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