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In 1946 the Autonomous Province of Kosovo and Metohija was established within the newly created Socialist Federal Republic of Yugoslavia. Previously, a Kosovar territorial entity had existed as an Ottoman province, until it was disbanded in 1912. During the disintegration of Yugoslavia in the 1990’s Kosovo unsuccessfully attempted to gain independence. A long struggle with Yugoslavia followed. When the situation escalated NATO intervened. As a result, the UN Interim Administration Mission for Kosovo (UNMIK) was established in June 1999, and is still in operation today. After long negotiations Kosovo unilaterally declared independence on 17 February 2008. At present the majority of UN-members do not recognize the republic of Kosovo.

Monetary situation prior to 1999

Before the establishment of UNMIK, Kosovo (as part of Serbia) was bound to Yugoslav monetary policy, and the Yugoslav Dinar. However war-time inflation and tensions with Yugoslavia had severely discretied the Yugoslav Dinar. As a result people preferred to use and hoard foreign currencies instead of relying on the Dinar. The most frequently used foreign currency was the German Mark. Although the US Dollar and Swiss Franc were also widely used.

The introduction of the mark

In the immediate post-conflict period, UNMIK considered it crucial to suspend ties between Kosovo and Yugoslavia. One of these ties was the Yugoslav Dinar. Thus, effective 3 September 1999 UNMIK designated the German Mark as Kosovo’s ‘main currency’. It became the only currency to formulate accounts and to perform compulsory payments. The Yugoslav Dinar was never officially withdrawn from circulation. However its use was “not encouraged”. The use of other currencies, mainly the U.S. Dollar, also continued.The move to establish the mark as legal tender was mostly a legalisation of the already existing situation. In practice the German Mark was already the most widely used foreign currency in the Balkans^[1] (Tagesspiegel,1999). The Bundesbank was not informed in advance, and did not send any additional coins and notes to Kosovo for the changeover. But since there were no restrictions on the import and export of German marks, and many Kosovars working abroad had sent money home, it was possible to supply Kosovo with sufficient marks.The Yugoslav (and later Serbian) Dinar continued to be widely used in Serb enclaves in Northern Kosovo.

Towards the euro

Like Germany, Kosovo switched to the Euro on 1 January 2002. The German Mark remained legal tender in Kosovo until 9 March 2002.The change to the Euro was achieved in cooperation with the European Central Bank, and several national banks in the Eurozone. By December 2001, about 100 million euro in cash was frontloaded to the Banking and Payments Authority of Kosovo. Kosovo does not mint any coins of its own.

References

Bogetic, Zjelko (2000). OFFICIAL DOLLARIZATION:CURRENTEXPERIENCESAND ISSUES. CatoJournal, Vol.20, No.2 (Fall 2000)

BQK (2010). http://www.bqk-kos.org/english/Currency_The_use_of_Euro.htm

NRC Handelsblad (1999). Kosovo krijgt douane en Duitse mark, 4 September 1999.

Starr, Martha (2004). Monetary policy in post-conflict countries: Restoring credibility. American University, May 2004.

Svetchine, Michel (2005). KOSOVO EXPERIENCE WITH EUROIZATION OF ITS ECONOMY. Central Bank of Albania.

Schon, Gerard (2008). Euro Munzkatalog.

Tagesspiegel (1999). Deutsche Währung wird auch im Kosovo offizielles Zahlungsmittel - die Bundesbank wurde nicht gefragt, 7 September 1999.http://www.tagesspiegel.de/politik/art771,1902807