EU-WB economic policy dialogue: Kosovo commits to implement reforms

Western Balkans countries' flags during Berlin process
Western Balkans countries' flags during Berlin process

BRUSSELS – The Economic Reform Programme (ERP) 2020-2022 was discussed by representatives of the EU Member States, the Western Balkans and Turkey, the European Commission and the European Central Bank, as well as representatives of the central banks of the Western Balkans and Turkey at their annual economic policy dialogue meeting in Brussels yesterday, it is stated in a press release.

The highlight of the meeting were the outstanding challenges in the public health, economic and social aspects in Western Balkans, Turkey and the EU Member States created with the outbreak of the COVID-19 pandemic. The parties agreed that this year’s economic policy dialogue will focus on measures providing an immediate fiscal, economic and social policy response to mitigate the impact of the pandemic, as well as transition to more structural measures to foster the medium-term recovery.

As regards Kosovo’s economic situation in 2019, economic growth remained relatively robust during 2019, led by consumption and private investment. At the same time, major structural obstacles to growth and competitiveness remain a challenge.

It is stated that this year’s meeting reviewed the Kosovo Economic Reform Programme, focusing on effective and well-coordinated structural reforms that will contribute to mitigate the impact of the pandemic and accelerate the post-crisis economic recovery. In particular to the challenges posed by COVID-19, “Kosovo should strengthen the public health sector, preserve employment and improve social protection, enhance the business environment and provide support to the private sector”.

Nataliya Apostolova, Head of EU Office in Kosovo/EU Special Representative, underlined that by participating in the ERP exercise Kosovo and the Western Balkans mirror the European Semester process.

“The implementation of the reform measures outlined in this year’s ERP will focus on and contribute to Kosovo’s capacity to manage and mitigate the unprecedented public health, social and economic impact created during the COVID-19 pandemic crisis. In strong solidarity, the EU has provided medical support to Kosovo to fight the pandemic crisis, and financial support to address the socio-economic impact”, said Apostolova adding that implementation of the structural reforms not only will bring Kosovo even closer to the EU but more importantly they will bring tangible benefits for the quality of life of Kosovo people.”

Besnik Bislimi, Kosovo’s on duty Minister of Finance and Transfers and Economic Reform Programme Coordinator welcomed the approval of the Joint Conclusions on Economic and Financial Dialogue. 

“The Government of Kosovo approved the emergency fiscal package, which supports business community, employees, and the beneficiaries of social assistance. The policy guidance reflects the need to tackle important measures on the macro-financial framework, financial sector and structural reforms, such as the one made through the fiscal package resulting in 14,213 workers registered in the formal sector. Therefore, efforts of the Government for economic recovery package will include support for the private sector and employees affected by the crisis, and structural reforms on specific sectors to contribute to development of the overall economy”, said Beslimi.

He added that the Government is thankful for the support that has been pledged by different development partners, including EU for the financial support and policy dialogue.

Six specific targeted reform measures were agreed upon

This year, it is stated that six specific targeted reform measures were agreed upon.

The first one is to create fiscal space and undertake well-targeted measures to address the socio-economic consequences of the crisis, including by containing spending on the public wage bill and on war veterans’ pensions through progress with the reclassification of beneficiaries. Also, to reinforce the medium-term sustainability of public finances, improve tax revenue collection by reducing informality.

The second one is to support economic recovery, improve the execution of capital spending by strengthening institutional capacities at central and local government levels for multi-annual investment planning and investment project management. As well as to improve the financial oversight and accountability of publicly owned enterprises, and to prepare an options paper on the establishment of an independent body for fiscal oversight for further consultations with stakeholders, including the EU.

The next measure is to closely monitor financial stability challenges as a result of the coronavirus pandemic and take appropriate action if needed, while developing a more integrated framework for measuring household indebtedness. The third measure also implies to undertake an in-depth analysis of the staffing and competence requirements in the central bank’s key policy areas, especially financial stability, as well as to continue with the inflation expectations survey and publish the time series once more data points become available.

The forth measure is to establish an effective and transparent mechanism to support the private sector and employees affected by the crisis, in particular micro, small and medium-sized enterprises and self-employed, with a view to mitigating the economic consequences of the pandemic and stimulate economic recovery. Extend social protection coverage and provide incentives for businesses and employees in the informal economy sector to register and to facilitate their transfer to the formal economy.

The fifth measure is to strengthen the health sector in order to provide adequate and accessible primary health services for all citizens. In the short term, to ensure increased coverage of unemployment benefits and needs-based social benefits for the groups most affected by the crisis. In the medium term, to review social assistance schemes, in particular the category-based pensions, to ensure that they are targeted at groups most in need and focused on poverty reduction.

And the last one is to take measures to preserve employment including through short-time work schemes and upgrade the capacity of the Employment Agency to ensure an increased provision of active labour market measures. Also to conduct a feasibility study for a Youth Guarantee scheme, with the aim of increasing the integration of youth in the labour market.

The Economic Reform Programme is a dialogue on economic governance between the EU and the Western Balkans and Turkey. The ERP is meant to prepare the region for future participation in the EU economic policy coordination system known as the European Semester.