Kosovo is adopting a new regulation that is erasing the Serbian minority’s dinar from the country’s economy. Political tensions are on the rise.
Kosovo appears to be risking a new wave of ethnic tensions with a decision to remove the Serbian dinar from its monetary system.
A new regulation, coming into force today, 1 February, states: “The only currency accepted for cash payments or transactions in Kosovo is the euro,” reported AFP.
Kosovo adopted the euro in 2002, despite neither being a member of the European Union nor the eurozone, the area sharing the euro currency.
Banning transactions in dinars could effectively lock out the local minority of Serbs, who use the currency widely, from the financial system in Kosovo. That could bring about another crisis with Serbia.
Following the war between the two territories that ended in 1999, Kosovo declared independence from Serbia in 2008. However, the latter has never officially acknowledged it. The two sides are regularly locked in bitter disagreements, even over minor issues such as licence plates.
Although Kosovo has adopted the euro, it has tolerated the use of the Serbian dinar over the years because of the approximately 120,000 Serbs living there. They receive their salaries and pensions in dinar.
Belgrade supports the Serbian community in Kosovo, with jobs and financial aid to the equivalent of €120 million each year.
The new ban leaves Kosovo Serbs with a vast amount of uncertainty. As a result of it, several banks in northern Kosovo started to close on Tuesday because they could no longer operate without a new licence or authorisation from the central bank.
One local resident made his views clear. “I have the impression that everyone is playing with us,” Zoran Ilic from Mitrovica told AFP. “No one tells us anything … I’m fed up with politics.”
Western governments call for ban to be suspended
Serbia has chosen this moment to consider reintroducing compulsory military service. However, President Aleksandar Vučić, making the announcement on Tuesday, cited tensions in the Balkans and elsewhere in Europe as a reason for considering doing so, rather than the potential currency crisis.
Meanwhile, Kosovo’s biggest political and financial allies are urging the country to suspend the ban amid fears of a rise in political and diplomatic tensions.
“We are concerned about the impact of the regulation in particular on schools and hospitals, for which no alternative process seems viable at the moment,” Reuters reported, quoting a joint statement issued on Saturday from the ambassadors of France, Germany, Great Britain, Italy and the United States.
The ambassadors called for a longer transition period and asked that the public be given a clear direction as to what was going to happen.
Why does Kosovo want to ban the Serbian dinar?
Authorities in Kosovo said that the new regulation has been introduced to fight corruption and money laundering.
First Deputy Prime Minister Besnik Bislimi said the new ban would put a stop to the flow of unregulated money from Serbia. AFP quoted him as saying: “Money continues to cross borders in travel bags and then be distributed by unregistered and unlicensed offices.”
The Serbian government sees Kosovo’s move as provocative and analysts say it is almost certainly going to damage continuing efforts to calm tensions between Belgrade and Kosovo.