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Kosovo to cap war veterans' pay to comply with IMF - PM

LONDON (Reuters) - Kosovo’s government plans to cap spending on payments to war veterans at 50 million euros, in line with demands from the International Monetary Fund (IMF), Prime Minister Isa Mustafa said on Thursday.

Kosovo's Prime Minister Isa Mustafa attends news conference at the Chancellery in Berlin, Germany, June 30, 2015. REUTERS/Fabrizio Bensch

Kosovo agreed a two-year funding deal with the IMF in July 2015 worth 184 million euros ($204 million), of which it has so far drawn 71 million euros.

But the fund has been critical of a significant rise in public spending, including the introduction of benefit packages for war veterans in the run-up to the 2014 elections.

The treatment of veterans of Kosovo’s 1990s war for independence from Serbia is a highly sensitive issue, raising questions over just who fought in the conflict and what they deserve from the young state.

Kosovo, which formally declared independence in 2008, is one of the region’s poorest countries. Political crisis has led to opposition deputies throwing tear gas in parliament in recent months.

“The war veterans’ number has increased beyond what was originally planned and the IMF evaluated this would destabilise the budget if we don’t have control over these expenditures and they believe that it is an amount of 50 million euros above which we cannot go for the war veterans,” Mustafa told Reuters on the sidelines of an investment conference.

“We have spoken with them (the veterans) and we have agreed that we have to make some changes in the law for war veterans and to apply these new norms,” said Mustafa.

He said the measures were included in the latest budget proposal and would be introduced in January, but added the process would not be an easy one.

Mustafa ruled out early elections.

“In the current political situation, elections would not solve anything, because of the political constellation and the political forces are what they are now - we would only repeat the same thing,” he said, speaking at a conference organised by Developing Markets Associates.

“We believe the mandate should be completed to the end,” he added, speaking through a translator.

($1 = 0.9038 euros)

Reporting by Karin Strohecker; editing by Andrew Roche