Alice Delhaye | 22 February 2024

Summary

• Kosovo announced a new currency regulation, affirming the Euro as its only official and de facto currency. 

• This policy comes in an already tense climate between the Kosovar and Serb minority population in Kosovo. 

• This regulation exacerbated dissent within the Serb community in Kosovo, which was perceived as a discriminatory measure. 

Whereas Kosovo adopted the Euro as its official currency in 2002, inhabitants in the Northern regions, which are predominantly Serbs, still use the Serbian dinar. The Kosovo Government has just introduced a new currency regulation, prohibiting the use of the Serbian dinar by all financial institutions as of 1st February 2024. 

Interpreted as a total ban by the Serbian minority in Kosovo, it is important to underline that the dinar can still be exchanged and held in non-euro bank accounts. Nonetheless, the currency law is fueling anger in the ethnic Serb community, predominantly present in the Northern regions that are connected to Serbia. Kosovar-Serb tensions in Kosovo remained since the end of the Kosovo War in 1999, resulting in the de facto independence of Kosovo, with the Serbian community, supported by their kin-state in Serbia, continuing to use the dinar as their primary currency for many basic transactions such as pensions and salaries.  

Though the Kosovo Government has affirmed that the new currency law is a measure to protect all citizens from organized crime, arms trafficking and money laundering, the measure is understood and experienced as ethnic discrimination by the Serbs. 

The rising tensions between the ethnic Kosovars and Serbians raise concerns as the region has been volatile. Just a few months ago, on 24th September 2024, a standoff between Serbian gunmen and Kosovo authorities in Banjska, Kosovo, resulted in four deaths.  

Forecast

• Short-term

  • Ethnic tensions are expected to rise in the Northern parts of Kosovo, as well as the probability of violent conflict between Serbs and Kosovars. 

• Medium-term

  • Due to the deteriorating security situation, NATO Military presence is expected to increase under the KFOR mission. As such, Germany has already deployed additional troops in Kosovo. 

• Long-term

  • The governments of Kosovo and Serbia will likely engage in diplomatic talks with the EU as a mediator despite underlying tensions.