Kosovo's PM hikes public sector wages by 25 pct ahead of vote

by Reuters
Monday, 10 March 2014 22:05 GMT

* New increase will cost additional 100 mln euro

* Talks for a new deal with IMF to start this month

* Kosovo remains one of the poorest countries in Europe (Adds IMF reaction)

By Fatos Bytyci

PRISTINA, March 10 (Reuters) - Kosovo's government raised pensions and public servants' wages by 25 percent on Monday, prompting the opposition to accuse Prime Minister Hashim Thaci of attempting to buy votes just a few months ahead of parliamentary elections.

The salary and benefit increases will include teachers, police officers, doctors, all state administration, pensioners and those who receive state care.

"Today we are taking a decision to raise salaries that will affect 240,000 families," Prime Minister Hashim Thaci said in a government meeting.

"Their budget will improve and their life will get better."

He did not gave any details on where the money will come from or if cuts would have to be made in Kosovo's 1.6 billion-euro budget. Kosovo economists say the new increase will cost an additional 100 million euros ($138.79 million).

General elections are expected to be held between June and September.

After serving two terms as prime minister, Thaci's government is facing criticism for nepotism, a high level of corruption and a lack of economic reform. On February his party split in two and analysts say he is likely to lose a large number of votes.

The International Monetary Fund (IMF), with whom Kosovo is looking to enter a new precautionary lending program, said it was monitoring the government's decision. Talks for a possible new deal will start this month.

In 2011 IMF canceled a program with Kosovo when Thaci hiked public sector wages by up to 50 percent to keep a promise made during the election campaign.

"Once we get more information, we can make our judgment in terms of the policy implications in reference to what has been agreed upon," the IMF resident representative in Kosovo Jose Sulemane told Reuters.

The opposition has accused the prime minister of using public money to improve his ratings ahead of the vote.

"This is an electoral increase that will complicate our relations with the IMF and World Bank and have a negative impact on our economy," Arben Gashi, a parliamentarian from the biggest opposition party the Democratic League of Kosovo (LDK) said.

"We are not against increasing wages but it has to be done based on the economy's performance and not just because we have elections."

Six years after gaining independence from Serbia, the land-locked country of 1.7 million people remains one of the poorest in Europe. Government data shows that more than 35 percent of the population is unemployed.

Foreign investors are often put off by its reputation for organised crime and corruption and simmering tensions between the Albanian majority and the Serb minority.

Kosovo's economy grew 2.5 percent in 2013 and is expected to grow four percent in 2014, based mainly on increased remittances and foreign aid. Up to 800,000 Kosovars live and work in Western European countries, mainly Germany and Switzerland.

($1 = 0.7214 euros) (Reporting by Fatos Bytyci; Editing by Toby Chopra)

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