Kosovo's new government is jeopardising its deal with the International Monetary Fund by sticking with a promise to raise public sector wages by up to 50 percent, diplomats told Reuters on Friday. An IMF mission arrives in the Balkan country next week and its decision on the 2011 budget is key to keeping international aid flowing into a country struggling with 50 percent unemployment a decade after its war with neighbouring Serbia.
During the campaign leading to the December election Kosovo's Prime Minister Hashim Thaci said he would raise public sector wages sharply and he has since said he intends to honour that commitment. The decision, which will add an extra 100 million euros to the roughly 1.5 billion euro budget, is in violation of the existing IMF loan agreement. Like several other states emerging from Socialist Yugoslavia, Kosovo has turned to the Fund to ease the impact of the world economic crisis. "The government should go out and tell people, we made a mistake promising you more money and the decision was taken without any economic analysis," a foreign diplomat close to the process told.
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