Kosovo off the Fragile States List: What does it mean for the economy?

In less than ten days, two of the largest international financial institutions – the World Bank and the International Monetary Fund – have removed Kosovo from the List of States in Situations of Fragility and Conflict.

After more than 15 years on this list, Kosovo now returns to the map of countries considered more institutionally stable and financially consolidated.

For both the Central Bank of Kosovo and the incumbent Government, this is an "important recognition of the country's institutional and economic progress."

Economic experts say this development could strengthen Kosovo's image as a stable and reliable country for investors and international partners.

What does Kosovo's removal from this list mean in economic terms?

Mejdi Bektashi, professor of Economics at the University of Pristina, says that the decisions of the World Bank and the IMF to remove Kosovo from the List of States in Situations of Fragility and Conflict are stimulating for future developments, to which Kosovo must adapt.

According to him, Kosovo, from now on, will have numerous benefits, not only from the World Bank and the IMF as financial institutions, but also from other financial markets operating in more developed countries.

"Mainly, by increasing access to credit, by reducing the risk rate, which means reducing the interest rate at which Kosovo can borrow or borrow from these institutions or other financial markets," Bektashi explains to Radio Free Europe.

For another professor of Economics, Berim Ramosaj, removing Kosovo from the List of States in Situations of Fragility and Conflict increases the confidence of local and foreign investors, expands opportunities for more favorable loans, both at the national and international levels, and gives second and third-tier banks the chance to perform better.

Other benefits

Bektashi says that support from the World Bank and the IMF ensures macroeconomic stability for Kosovo, benefiting not only the public sector, but also the private sector, which will have easier access and more favorable terms to loans from developed countries.

However, he emphasizes that most of the financial activity in Kosovo is related to the European Union, which, for two years, has imposed restrictive measures on the country due to tensions in the north.

"The austerity measures imposed by the European Commission, as well as the failure to form (Kosovo's) institutions that has been going on for months, are very bad, very disappointing signals for the most important financial institutions, but also for the EU," says Bektashi.

He adds that the decisions of the World Bank and the IMF should now serve as a positive signal for the EU itself to lift austerity measures and adopt a more moderate approach towards Kosovo.

Do the decisions of the World Bank and IMF reflect real improvements?

The World Bank and IMF decisions on Kosovo are a "stimulating carrot," says Bektashi.

He points out that in Kosovo there is still political interference in the justice system – which calls into question the guarantee of fair decisions.

It says that the trade deficit remains high, while the economic policies of the incumbent Government have not brought the expected improvements.

"I believe that we, in reality, have not improved the macroeconomic and financial situation. But, it is a more political decision (of the World Bank and the IMF), where the Central Bank of Kosovo has contributed more than the current government in office, since the conversations or contacts of these institutions, completely, have to do with the CBK," says Bektashi.

Ramosaj also believes that the Central Bank of Kosovo deserves credit for this decision.

He says that Kosovo has made progress in economic and institutional sustainability, but that, fundamentally, the economic and political reality are not yet fully stable.

"There are also improvements in the governance of budget revenues, especially in macro-financial policies. However, there are also problems of other natures, whether in the failure to establish institutions on time, in the failure to perform the function of the legislature - which is also the founder of several independent agencies - or in the non-existence of a government in the full sense, except for the one in office," Ramosaj tells Radio Free Europe.

He refers to the fact that Kosovo has not yet managed to constitute a new Assembly – even though elections were held on February 9 – due to political disagreements, and as a result is functioning with an incumbent government.

Despite this, the acting Prime Minister, Albin Kurti, has described Kosovo's removal from the List of Fragile States as the result of his government's "continuous and dedicated work" over the last four years.

"And it's just a step towards the achievements to come," he wrote in X.

Is there a risk that Kosovo will be put back on the list and what should the authorities do?

Bektashi does not believe that Kosovo can return to the state it was in, in terms of treatment by the World Bank and the IMF.

According to him, decision-making in these two financial institutions "is too complicated to go back on."

"I think that with the constitution of the Assembly, as well as the Government, we will have a significant influx of funds, both from these two institutions, but also from the EU. The economy will be liberalized and we will have more foreign investment," he emphasizes.

Ramosaj shares the same opinion, emphasizing that the World Bank and IMF decisions on Kosovo are the result of a careful and long process.

"That is, it is a powerful database that gives them a meaning for a decision. Even to make another eventual decision, in the worst case... it cannot be made immediately. Decadence must occur in terms of institutions, poverty, politics, and then it can happen," says Ramosaj.

Both experts recommend that Kosovo continue to strengthen institutions and implement sustainable economic policies, carefully following the suggestions of the World Bank, the IMF and international partners, to ensure sustainable development and increased investor confidence.

https://www.evropaelire.org/a/kosova-jashte-listes-se-shteteve-te-brishta/33477988.html