WASHINGTON, April 21, 2022—The Minister of Finance of the Republic of Kosovo, Hekuran Murati, and the World Bank Vice President for Europe and Central Asia, Anna Bjerde, signed today a Financing Agreement for the Kosovo Public Finances and Sustainable Growth Development Policy Financing (DPF). This financing, in the amount of EUR 50.6 million ($56.4 million equivalent) supports selective national priorities for the period 2021–2025, including reform efforts to improve fiscal transparency, enhance private sector development, and strengthen environmental sustainability in the wake of the COVID-19 crisis.
“Kosovo needs faster and more resilient growth that creates jobs and is driven by higher productivity, and the reforms supported by this operation will help Kosovo strengthen its post-COVID recovery and improve the lives of its people,” said Anna Bjerde, World Bank Vice President for Europe and Central Asia.
Kosovo’s economy experienced a strong recovery in 2021, supported by a rebound in domestic demand and record export growth, however growth is expected to decelerate this year. In this context, the DPF will support measures aimed at improving fiscal transparency and enhancing fiscal sustainability in the medium term, to ensure the government can address sizable developmental gaps and promote faster poverty reduction.
The DPF will also support a series of measures to improve the enabling environment for private sector development, whose importance was highlighted by the pandemic. Kosovo’s private sector falls below expectations in terms of job creation and productivity growth. Among the constraining factors are a burdensome and uncertain regulatory framework, with many licensing requirements and business inspections, inadequate energy supply, and an incomplete legal framework for e-commerce, including electronic identification.
The sustainability and inclusiveness of growth in Kosovo is also significantly endangered by its pressing environmental and climate change challenges. Kosovo has been experiencing more frequent and severe droughts and floods. Energy production that is highly dependent on fossil fuels and inadequate waste management contributes to heavy air pollution and environmental degradation and negatively affects the health of the country’s citizens, risking Kosovo’s long-term growth prospects. To help Kosovo’s efforts for a green transition, the DPF also supports environmental reforms in sustainable power generation and waste management.
The DPF is financed with a concessional credit from the International Development Association (IDA) of the World Bank Group. It has a maturity of 25 years and a 5-year grace period. The project will be coordinated by the Ministry of Finance, Labor and Transfers of Kosovo.