IMF warns that Kosovo's 100% import tariffs backfired on local population

IMF warns that Kosovo's 100% import tariffs backfired on local population
A marketplace in the Kosovan capital Pristina. Prices of food and other consumer goods have been pushed up by the 100% tariffs.
By Valentina Dimitrievska in Skopje June 20, 2019

The International Monetary Fund (IMF) said on June 19 that Kosovo’s 100% tariff imposed on imports from Serbia and Bosnia & Herzegovina has increased consumer prices, especially of food, impacting lower income households.

Kosovo introduced the politically motivated tariffs on goods from Serbia and Bosnia in November 2018, after Belgrade thwarted Pristina’s bid to join Interpol. Kosovo declared independence in 2008 and is still not recognised by Serbia and Bosnia (by Bosnia as a result of the veto imposed by one of the two entities, the Bosnian Serb-dominated Serb Republic) as an independent country.

The statement was released after the IMF mission led by Stephanie Eble, visited Pristina during June 12-18, to discuss economic developments and the economic outlook of the country

The IMF said that Kosovo’s key challenge is to achieve higher private sector and export-led growth.

“While the growth remains strong but higher private sector and export-led growth is needed to reduce high unemployment and a wide income gap with peers,” the IMF said in the concluding statement.

The IMF also warned that recent costly policy initiatives, such as large wage increases combined with an increase in employment, could increase current spending, hamper private sector development and weaken the investment climate.

At the same time the IMF said that social benefits under discussion, as well as a proposed minimum wage increase, could also hamper private sector development by impeding efforts to reduce joblessness and the informal sector.

"Instead, the authorities need to move ahead with the restructuring of public enterprises; enhance the implementation of high-quality investments; accelerate education reforms; strengthen the rule of law and business climate; and advance long overdue war veteran reforms to free up space in the budget for pro-growth spending," the IMF concluded.