Kosovo’s Controversial Currency Ban Risks Renewed Ethnic Tensions

February 5, 2024

Recently, Kosovo has sparked new controversy by banning the Serbian dinar to assert financial control and normalize use of the euro. The ban has sparked concern from the European Union, United States, and Serbia.

Background

Serbia and Kosovo are two countries in Balkan peninsula. Serbia (capital: Belgrade) was formerly part of Yugoslavia before breaking up into independent countries during the 1990s. Kosovo (Capital Pristina), which declared independence from Serbia in 2008, has an ethnic Albanian majority population with other populations such as Serbians, Bosniaks, and others as minorities.

The idendendece of Kosovo was not recognized by Serbia. Many ethnic Serbians in Kosovo keep rejecting Kosovo’s independence and depend on salary and pensions of Serbian-funded institutions. That means their salaries / pensions are paid in Serbian dinars rather than the euro, which is Kosovo’s official currency.

To assert its financial control, Kosovo has banned use of the Serbian dinar currency in the country on February 4, 2024. Kosovo’s Central Bank said it has a legal obligation to regulate the financial system. This ban applies mainly to northern Kosovo which has a Serb ethnic majority. Currently, four banks and 15 financial institutions in the north of Kosovo use the Serbian dinar.

Effects and Issues

The currency ban threatens to increase ethnic tensions with Serbia and harm Kosovo’s minority Serbians who rely on Serbian institutions. This risks setting back Kosovo’s international relations despite years of gradual progress after its war for independence. The ban has also sparked concern from the European Union, United States, and Serbia, who are concerned about the serb minorities of Kosovo.

However, Kosovo has justified the ban as non-negotiable and necessary to enforce the euro.

History of Ethnic Tensions

Ethnic tensions have long existed between the majority ethnic Albanian population that dominates Kosovo and the ethnic Serb minority concentrated in northern areas. In 1998-1999, Serbian forces fought Albania separatists in Kosovo, leaving 13,000 dead, mostly ethnic Albanians. A NATO bombing campaign pushed out Serb forces, and Kosovo declared independence in 2008 which Serbia does not recognize.

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