News 17 Mar 11

IMF Voices Alarm Over Kosovo Budget

The International Monetary Fund says Thaci government's decision to hike state salaries is not in line with Stand-By Arrangement.

Petrit Collaku

The IMF mission to Kosovo has criticised planned substantial increases in the government's wage bill envisaged in the budget draft for 2011. "This increase is not in line with the program objectives under the SBA," the IMF said, referring to the Stand-By Arrangement.

More positively, the IMF mission said Kosovo's economic recovery was on track amid "robust growth and private sector credit".

"Real output growth is expected to reach 5.5 per cent in 2011," The IMF said. "There are encouraging signs that, despite an adverse trend in non-performing loans, the banking sector remains stable," it added.

The IMF mission, led by Costas Christou, visited Kosovo from March 7 to 15 for discussions with the authorities on the first review under the Stand-By Arrangement.

In its meetings with the government, the mission said the discussions on the 2011 budget "advanced but could not be concluded during the mission’s stay and will continue in the period ahead".

The finance ministry said the IMF mission would return in the near future to continue discussions. "In the meantime, Kosovo's government will continue to implement the program and will prove ready to fulfill its commitments," Muharrem Shahini, a ministry spokesperson, told Balkan Insight.

Kosovo's government-approved budget for 2011 includes salary hikes for teachers and civil servants of 50 and 30 per cent respectively. The assembly is to discuss it on March 25.

The draft budget will take the cost of state salaries to 383 million euros, up from 311 million euros in 2010. Kosovo’s budget for 2011 is 1,264 million euros.

At Wednesday's meeting of the government, Prime Minister Hashim Thaci stated said he hoped parliament, including the opposition parties, would approve the budget.

Thaci was decisive on the subject of the promise he made during the election campaign in December, when he said that wages for many state employees in Kosovo were too low.

The Stand-By Arrangement agreement paved the way for a 110-million-euro soft loan, which opened the door to a further 300 million euros in aid from the European Union and the World Bank over the next three years.

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