But, the CBK does not have an independent monetary policy because even though it uses the euro, Kosovo is not integrated into the Eurozone. Since monetary policy is determined by the decision-making body of the European Central Bank, which Kosovo is not part of, Kosovo is implementing a policy which it cannot influence in any way.

Agron Demi, a policy analyst at GAP institute, is also against broad salary increases. Despite the reduction of public sector wages in the last two years, Demi, in an article, argued that from 2012 to 2019, net wages in the public and private sector increased by about 20%, widening the gap with the minimum wage, which has not changed since 2011. Raising the minimum wage would, according to Demi, be the best move by the government.

In a recently published analysis, GAP Institute recommended increasing the minimum wage. However, they suggest that raising the minimum wage may have an effect on further price increases, as it would increase income and therefore, demand. Their analysis recommends implementing already on-the-books legislation that would lead to yearly increases in the minimum wage based on cost of living expenses, the unemployment rate, the labor market situation and the level of competition and productivity in the country.

To better understand the minimum wage, you can watch the video-explainer of K2.0 below.

GAP Institute also recommends increasing payments to beneficiaries of the social assistance scheme, which fails to cover basic life necessities for its recipients.

Another measure being talked about is issuing food vouchers, which would be provided by the government as a crisis relief measure and enable the purchase of certain products, which, along with the amount, are determined by the relevant government institution. For example, with a 50 euro food voucher, consumers would only be able to buy specific foods, such as oil, eggs, bread and more. Food vouchers would be paid for by the government, ultimately covered by consumer taxes.

Another potential measure to respond to inflation is the freezing of key prices, which has been implemented by some countries in the region, such as North Macedonia and Serbia. In early December 2021, North Macedonia decided to freeze prices for 60 days of basic products — bread, sugar, flour, oil, milk, meat, cheese, cottage cheese, rice, eggs, pasta — at the price level they were at on December 1. Serbia did the same a month earlier.

In addition to the impact of global inflation on Kosovo’s domestic inflation, the media have also reported on secret agreements between industry associations, known as cartels, to raise prices, for example agreements between hairdressers or bakeries. In Kosovo, these agreements are prevented by the Kosovo Competition Authority (KCA), a public, independent institution. KCA has the power to override agreements between enterprises regarding goods and/or services that affect a market within Kosovo.

But currently this authority is non-functional since from June 9, 2021 it has no chairman and the mandate of the Commission has expired and as such it cannot investigate any suspicion of secret agreements. For the authority to function, the prime minister must propose names for the mandate and the Assembly must approve them.

The International Monetary Fund expects inflationary pressures to remain stable until mid-2022 and gradually ease thereafter, but with the pandemic becoming intense again due to the Omicron variant and new restrictive measures in the world, forecasts are uncertain.

With monthly bills growing day by day, this year seems to be one of the hardest to manage from month to month.

Feature Image: Ferdi Limani / K2.0

This publication was published with the financial support of the European Union as part of the project “Citizens Engage”, implemented by K2.0 in partnership with GAP Institute. Its contents are the sole responsibility of Kosovo 2.0 and GAP Institute and do not necessarily reflect the views of the European Union.

Another expensive year

Many causes of inflation, few opportunities to intervene.

Import and regional inflation

Standard of living