Kosovo defies western pressure that it delay Serbian currency ban

Kosovo is defying western pleas that it delay a ban from Thursday on Serbia’s currency for cash transactions on its territory, a proposal that has triggered new tensions between the two countries after decades of instability in the Balkans.

BQK, Kosovo’s central bank, earlier this month issued an order to enforce the euro as the sole cash currency from February 1. The euro is the country’s de facto currency, although it is not a formal member of the eurozone.

The prohibition would bar the ethnic Serb minority, which has widely retained the use of the Serbian dinar, from conducting business as usual, and even undermine the operation of public institutions, igniting more tensions, western officials say.

“The Regulation . . . will come into effect on February 1,” the BQK told the Financial Times on Wednesday. “No individual or legal entity can offer deposit or cash withdrawal services . . . without holding a licence and authorisation from the Central Bank of the Republic of Kosovo.”

International powers have implored Kosovo’s leaders to delay the switch to avoid hurting basic services that would be difficult to replace.

“We are concerned about the impact of the regulation in particular on schools and hospitals, for which no alternative process seems viable,” the ambassadors of the US, Germany, France, Britain and Italy said in a joint statement on Sunday.

“The regulation will also have a direct impact on the everyday lives of the overwhelming majority of Kosovo Serbs who receive payments [or] financial assistance from Serbia.”

US ambassador Jeffrey Hovenier visited Kosovo central bank governor Ahmet Ismaili on Monday to ask for a delay, Hovenier wrote on the social media platform X.

The issue highlights stalled progress on improving relations since a bloody stand-off between Serb militants and Kosovo police last autumn.

After a brief war of independence, Kosovo was placed under a UN protectorate and then unilaterally declared independence in 2008, a move that has since been recognised by most of the west and the International Court of Justice, but vehemently rejected by Serbia.

Kosovo wants full authority on its territory, including over institutions and finances. Serbs, meanwhile, demand autonomy and have operated parallel institutions such as courts, schools or municipal services, outside Pristina’s purview. Those institutions — deemed illegal by Pristina — have been financed with dinars from Belgrade.

Serbia’s main Kosovo envoy Petar Petković said President Aleksandar Vučić asked chief EU negotiator Miroslav Lajčák at a meeting in Belgrade on Monday to help persuade Kosovo to stop its “provocations”.

“The abolition of the dinar aims to expel the Serbs from the North [of Kosovo] and put an end to the dialogue” on resolving differences between Belgrade and Pristina, Petković told local media.

Serbs have taken issue with symbolic steps from Pristina to exert its authority, such as a rule mandating the use of Kosovo-issued vehicle licence plates instead of Serbian ones, including in majority ethnic Serb areas. Serbs erected barricades in protest and that issue dragged on for a year and a half before being settled in December.

The demise of the dinar inside Kosovo could be a more volatile challenge, and the deadline to enforce it — two weeks from announcement to reality — was too short for a successful transition, according to western diplomats.

In its explanation to the public issued after the announcement, the Kosovo central bank signalled that as of February 1 “the only valid currency for cash payment transactions . . . in the Republic of Kosovo is the Euro”.

Other, non-euro, currencies can be used for the physical storage of wealth, or in bank accounts denominated in non-euro currencies, as well as for making international payments and for regulated foreign exchange activities, the bank said.

The dinar-euro switch would be hard to stomach for Serbs. Businesses in Serb-majority areas have regarded the euro as a symbol of Pristina’s authority and often pointedly gave change in dinars even if they accepted euros for payment.

But most challenges will be practical for ordinary Serbs, tens of thousands of whom receive some form of payment from Belgrade each month, according to Milica Andrić Rakić, a rights campaigner in the largest city of North Kosovo, Mitrovica.

‘It’s going to wreak havoc in the local economy,” she said. “Everyone, every single family, receives some form of payment from Serbia.”

Only a handful of places have handled cash dinars in Kosovo. Belgrade-based Komercijalna Banka, owned by Slovenia’s NLB group, will no longer do that from February, leaving the market to Serbia’s post office and the Postal Savings Bank, also from Serbia.