European Western Balkans

EC and Kosovo authorities discuss economy, statistics and structural reforms

New Born sign in Pristina Kosovo: CC BY-SA 2.0; Gebäude der UNMIK NEW BORN SIGN PRISTINA KOSOVO Giv Owned Image 23 August 2008.jpg

BRUSSELS – The European Commission (EC) and the Kosovo Government held their last meeting within the Stabilisation and Association Process Dialogue (SAPD) on 31 May. The meeting focused on the economy, financial issues, statistics and financial control. With the entry onto force of the Stabilisation and Association Agreement (SAA) between the EU and Kosovo, the dialogue framework will be reformed – discussions will take place within the SAA framework, as sub-Committees.

The Commission and Kosovo Government representatives discussed a number of policy areas, including Kosovo’s macro-economic development, fiscal and financial policies, structural reforms and private sector development, the statistical system and financial control.

Initially, the Commission stressed the importance of implementing the recently adopted Joint Conclusions on the 2016-2018 Economic Reform Programmes adopted last week.

In the area of economic and fiscal policies, the key economic indicators were discussed including GDP growth, inflation, the labour market and the balance of payments. While Kosovo’s economic growth picked up in 2015, this was mostly the consequence of the full year’s effect of public wage and pension increases and higher remittances, while the production base remains weak. Kosovo will need to strengthen its production base, also in order to benefit fully from the entry into force of the SAA.

The Government presented changes in fiscal policies, in particular tax reforms and changes to the fiscal rule that will allow for more development-oriented capital projects, and wage rule to link the changes in public wages to the nominal growth. Major infrastructure projects, included in the Single Project Pipeline list, were also discussed. The Commission stressed the need for the full implementation of the agreed Stand-By Arrangement with the IMF. Particular concern was expressed over the increase in the scheme of war-related benefits, which could result in a significant over expenditure of the approved budget. In this context, the Commission encouraged Kosovo to find necessary compensatory measures to ensure the budget remains within the fiscal rule and to preserve a growth friendly pattern of expenditure.

The authorities presented the state of play of key structural reforms in sectors such as health, education, public administration and privatisation. The Commission congratulated the Government for prioritising the most relevant projects within the Single Project Pipeline. Such prioritisation needs to continue on an ongoing basis and is an absolute precondition for the selection and implementation of projects, among the vast and pressing needs. The Commission took note of the progress made, and stressed the need to address pressing issues  such as improving access to finance, deficient rule of law, widespread informal economy,  inadequate professional education, and  implementing e-procurement.

In the area of statistics, the Commission pointed to the need to adopt the amendments to the Law on Statistics and adopt the Law for a population Census in four municipalities in Northern Kosovo. The resource situation for production of Official Statistics in Kosovo was discussed also in view of data requirements and their timeliness. The discussion also focused on the requirement to strengthen national accounts, and for this purpose also business statistics. The Commission also encouraged Kosovo to invite for International Monitoring for a census in four municipalities in Northern Kosovo. Efficient collection and publication of statistics is a priority for evidence-based policy.

In the area of Financial Control, the recent developments in the Public Internal Financial Control were discussed. It was pointed out that attention should be paid to ensuring a comprehensive of Public Internal Financial Control and Public Finance Management and Public Administration Reforms. The Commission also welcomed the recent appointment of the new Auditor General and the adoption of the Law on National Audit office.

The meeting was co-chaired by the Ministry for European Integration and the European Commission Directorates-General for Economic and Financial Affairs, and the one on Neighbourhood and Enlargement Negotiations.

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