Gërxhaliu: Increase in banking rates, a blow to private sector

The International Monetary Fund`s request to increase interest rates has sparked reconcilement and disagreements in the country. Some economic experts think that the increase in loan interest would stop inflation, and others consider that this will squeeze the private sector in Kosovo.Currently, the interest rates of loans in the country are 6.5%.

The International Monetary Fund has asked the European Central Bank (ECB) to continue raising interest rates until mid-2024, to control inflation in the countries of the European Union.

Some economists agree that these rates should be increased to reduce inflation, while others see the increase in loan rates as worrying.

For economist, Arian Sahiti, this increase would be necessary.

"This normally has an impact on us in Kosovo, because we follow Euribor. Thus, the impact has been on those who will receive new loans and those who are existing. On the other hand, the impact has been positive for the broad masses of people, because the large amount of money in the market is stopped and when there is no large amount of money in the market, then prices tend to fall. Consequently, if the products are not sold anyway, the prices will fall," he told Radio Kosova.

But for the Economy expert, Safet Gërxhaliu, the call for an increase in loan rates is very worrying.

He told Radio Kosova that for the private sector, this will be a big challenge.

"First of all, it must be understood that in Kosovo we are not serious about the crisis and many processes are being neglected. Secondly, the request of the International Monetary Fund to the European Central Bank has been very disturbing, where it is persistently requested to increase the interest on loans to fight inflation, while Kosovo in this direction is facing many challenges, because, on the one hand, we have inflation, which is very worrying, on the other hand, we have Europe, which, as it seems, will not be able to escape the recession. The future will be challenging for the private sector because today in Kosovo we have bank interest rates close to 7%, if it continues in this direction, these interest rates will have an upward trend and there will be a squeeze on the private sector", said Gërxhaliu.

The average interest rate on loans in commercial banks, according to the Central Bank of Kosovo, is 6.5 percent.

Meanwhile, Euribor has increased within a few months from 0.45 to 3.8%.