medium term expenditure framework 2021-2023 - mf.rks-gov.net
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Medium Term Expenditure Framework
2021-2023
September 2020
Republika e Kosovës
Republika Kosova- Republic of Kosovo
Qeveria- Vlada- Government
Ministria e Financave
Ministarstvo za Finansije
Ministry of Finance
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List of Abreviations
VET Vocational Education and Training
KPCVA Kosovo Property Comparison and Verification Agency
PAK Privatisation Agency of Kosovo
KPA Kosovo Property Agency
EARK Employment Agency of the Republic of Kosovo
KAS Kosovo Agency of Statistics
TAK Tax Administration of Kosovo
GNIA Gross National Income Available
WB World Bank EU European Union
EBRD European Bank for Reconstruction and Development
GDP Gross Domestic Product
CBK Central Bank of Kosovo
ERS Energy Renewable Sources
ERA European Reform Agenda
EUROPOL European Union Agency for Law Enforcement Cooperation
KAF Kosovo Armed Forces
IMF International Monetary Fund
KSF Kosovo Security Force
HEIs Higher Education Institutions
CPI Consumer Price Index
IFACCA International Federation of Arts Councils and Culture Agencies
IFIs International Financial Institutions
FDIs Foreign Direct Investments
INTERPOL International Police Organization
IPA Instrument for Pre-Accession Assistance
NBIHS Non-beneficiary Institutions for Household Services
MTEF Medium Term Expenditures Framework
KfW Kreditanstalt für Wiederaufbau
ODC Other Depositing Corporations
LLGF Law on Local Governance Finance
LPFMA Law on Public Financial Management and Accountability
MEST Ministry of Education, Science and Technology
MoF Ministry of Finance
MKSF Ministry of Kosovo Security Force
MLSW Ministry of Labour and Social Welfare
SAA Stabilisation and Association Agreement
MoH Ministry of Health
NATO North Atlantic Treaty Organization
PE Public Enterprises
SMEs Small and Medium-Sized Enterprises
NERP National Economic Reform Programme
NPISAA National Program for Implementation of Stabilisation and Association Agreement
ERP Economic Reform Programme
SSSR Strategic Security Sector Review
RTK Radio Television of Kosovo
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HIS Health Information System
NDS National Development Strategy
EMIS Education Management Information System
CMIS Case Management Information System
HUCSK Hospital and University Clinic Services of Kosovo
IT Information Technology
ICT Information and Communication Technology
VAT Value Added Tax
UNESCO United Nations Educational, Scientific and Cultural Organisation
USAID United States Agency for International Development
WEO World Economic Outlook
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Table of Contents 1. DECLARATION OF MEDIUM-TERM PRIORITIES OF THE GOVERNMENT ............................. 7
LABOUR MARKET AND EMPLOYMENT ........................................................................................................ 16
SECOND PART .................................................................................................................................................. 21
1. MACRO-FISCAL FRAMEWORK .................................................................................................... 21
2.1. MACRO-ECONOMIC FRAMEWORK......................................................................................................... 21
2.1.1 EXTERNAL ECONOMIC ENVIRONMENT ................................................................................... 21
2.1.2. LATEST DEVELOPMENTS IN THE KOSOVO ECONOMY .......................................................... 24
Information Box 1. Comparing macroeconomic forecasts used for previous MTEFs with actuals .................. 27 2.1.3. MACROECONOMIC PERSPECTIVE 2021-2023 ............................................................................ 29
Information Box 2 . Comparison of macroeconomic forecast for MTEF 2021-2023 with other institutions... 31 2.2. FISCAL FRAMEWORK 2021-2023 .................................................................................................. 32
2.2.1. GOVERNMENT REVENUES AND EXPENDITURE ..................................................................... 32
2.2.1.1. REVENUES AND EXPENDITURE IN 2020 ................................................................................... 32
2.2.1.2. REVENUE PROJECTIONS 2021-2023 ............................................................................................ 33
Information Box 3. Comparison of projections and actuals for year 2019........................................................ 34 2.2.1.3. EXPENDITURE PROJECTIONS 2021-2023 ................................................................................... 35
2.2.2. BUDGET DEFICIT AND THE FISCAL RULE ............................................................................... 37
Information Box 4. Main deviations between MTEFs 2021-2023 and 2020-2022 for 2021 and 2022 ............... 37 2.2.2.1. THE LEVEL OF STATE DEBT, DEVELOPMENTS AND PERSPECTIVES FOR THE
UPCOMING YEARS ........................................................................................................................................... 38
2.3. MEDIUM-TERM RISKS 2021-2023 ................................................................................................. 42
THIRD PART ...................................................................................................................................................... 48
3. SECTORIAL EXPENDITURES FRAMEWORK 2021-2023 – CENTRAL GOVERNMENT ........... 48
PART FOUR ....................................................................................................................................................... 67
4. MUNICIPAL LEVEL ....................................................................................................................... 67
4.1. General Grant .............................................................................................................................................. 67
4.2. Additional grant for the financing of the Capital City ......................................................................... 71
4.3. Specific grant for pre-university education .......................................................................................... 71
4.4. Primary health specific grant ............................................................................................................... 74
4.5. Secondary health financing .................................................................................................................. 75
4.6. Residential services financing ............................................................................................................... 75
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4.7. Funding for the Historic Center of Prizren, the Cultural Center of the village of Zym and the Council
of the Hoçë e Madhe ........................................................................................................................................... 75
4.8. Financing for the endangered environmental area of Obiliq ............................................................... 76
4.9. Financing for Theatre ........................................................................................................................... 76
4.10. Projections of Municipal Own Source Revenues for 2021 and forecasts 2022-2023............................ 76
4.11. Investment clause .................................................................................................................................. 78
4.12. Sumamry of municipal funding for 2021-2023 ..................................................................................... 78
ANNEX 1 ............................................................................................................................................................ 79
ANNEX 2 ............................................................................................................................................................ 88
Table 1 Prices in international markets ...................................................................................... 23
Table 2 General Debt ................................................................................................................ 38 Table 3 International Debt including undisbursed debt as of sipas 31.07.2020 ........................... 39
Table 4 Sensitivity analysis of the budget to fluctuations of macroeconomic variables for the
three-year period 2021-2023 ..................................................................................................... 44
Table 5 Outstanding liabilities ................................................................................................... 46 Table 6 Payments based on court decisions (mln Eur) ............................................................... 47
Table 7 Determining the value of the General Grant for municipalities 2021-2023 (mil. Euro) .. 68 Table 8 General Grant Structure for 2021-2023 according to LFPL (mil. Euro) ......................... 69
Table 9 Distribution of General Grant at municipalities 2021-2023 .......... Error! Bookmark not
defined. Table 10 Distribution of additional Grant for financing the Capital 2021-2023 .......................... 71 Table 11 Distribution of Specific Grant for Education for the year 2021-2023 .......................... 73
Table 12 Primary health specific grant, for 2021-2023 .............................................................. 74 Table 13 Financing for residential services for 2021-2023 ......................................................... 75
Table 14 Financing for theatres for 2021 ................................................................................... 76 Table 15 Projections of municipal own source revenues for 2021-2023 ..................................... 76
Table 16 Summary of municipal funding for 2021-2023 (mil. euro) .......................................... 78
Graph 1 Economic growth in other countries ............................................................................. 24
Graph 2 Current account balance ............................................................................................... 26 Graph 3 Labour market ............................................................................................................. 26
Graph 4 Loans, deposits and non-performing loanse ................................................................. 27 Graph 5 Real GDP and key contributors .................................................................................... 31
Graph 6 Revenue structure in overall revenues .......................................................................... 33 Graph 7 Structure of budget expenditures .................................................................................. 35
Grafiku 8 Trend of General Debt and as percentof GDP ............................................................ 41 Graph 9 Real economic growth, y-o-y, % .................................................................................. 43
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Foreword
Revision of the Medium-Term Expenditure Framework has been drafted in order to reflect the
significant changes to the main economic indicators as a consequence of situation with COVID-
19 pandemic. MTEF document was drafted in April 2020 based on an serious socio-economic
situation, characterised with high uncertainty for the rest of the year due to the pandemic. Main
economic indicators, mainly fiscal ones, during the last months signal that the expectations for the
end of the year 2020 will be significantly different compared to the period during which the initial
MTEF was prepared. Considering the importance of MTEF in orienting the preparation of Budget
for 2021, a process which is expected to be initiated soon, Ministry of Finance decided to revise
the MTEF for the first time.
The main purpose of the MTEF revision is to provide an analysis that reflects the macro-economic
environment in the country, thus laying the basis for budget planning for the coming years, in
compliance with the strategic priorities of the Government.
Economic reform priorities for the medium-term period stem from the National Development
Strategy and Economic Reform Programme 2020-2022, which derives from the dialogue process
for economic governance between Kosovo and EU. At the same time, due to the situation caused
by the COVID-19 pandemic, the Government priorities are oriented towards the overcoming of
crisis and economic recovery.
MTEF 2021-2023 revision summarises these key priorities of the Government in the Medium-
Term Priorities Statement and then in the relevant chapters, which cover all budget sectors,
describing the approach how the funds for their implementation will be ensured from the Kosovo
budget and financial assistances or loans from development partners.
MTEF 2021-2023 has been structured into four main parts. The first part contains the “Declaration
of Medium-Term Priorities”, which provides a broad summary of the Government priorities in
compliance with the Government Program, National Development Strategy and Economic Reform
Programme. Second part consists of the macro-fiscal framework based on the overall economic
development parameters. The third and fourth part contain the fiscal projections, which determine
the overall expenditure limits based on which the Central and Municipal Budget is later prepared.
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PART ONE
1. DECLARATION OF MEDIUM-TERM PRIORITIES OF THE GOVERNMENT
General objectives and fiscal framework
As the document Medium-Term Expenditure Framework 2021-2023 represents the main
document based on which the annual budget for the coming year 2021 will be drafted, the Ministry
of Finance considered the MTEF revision as necessary. The main purpose of Medium-Term
Expenditure Framework revision is to adapt the overall Government priorities as a result of the
pandemic. This is also aimed at linking based on the comprehensive analyses of the macro-
economic environment and budget planning for the coming years, with a 3 (three) year perspective
in compliance with the Government strategic objectives.
Strategic objectives of the Government of Kosovo have been set through the Government Program,
strategic documents, such as National Development Strategy and sectorial strategies, as well as
documents deriving from the European Integration process, such as Economic Reform Programme
and National Program for the Implementation of SAA. Kosovo is facing a serious situation as a
result of the COVID-19 pandemic both in public health and economy. Therefore, the basic
objectives set in the Government Program are: i) the battle to defeat the pandemic, and ii) post-
pandemic economic recovery.
Considering the current economic structure of Kosovo and numerous obstacles to economic
growth, in particular situation created as a result of the global pandemic COVID-19, it is necessary
to orient the structural reforms aimed at recovering the economy in general. To this end, the
Government, considering also the support by the development partners, will undertake the
necessary assessments of the impact of the pandemic crisis on the economy and will undertake
ongoing measures for economic recovery. To this end, the Government also planned undertaking
measures to ensure sustainable economic growth by channelling funds in economy where needed
and where the effect is maximal, thus creating e new momentum for economic development,
placing the economy of Kosovo on a higher trajectory of growth and long-term development, with
higher and better employment.
The process of Kosovo accession to European Union is important not only for economic
development, but also to improve the governance and institutions of the country, as well as for
international political and economic integration and security of the country. Stabilisation and
Association Agreement (MSA) between the Republic of Kosovo and European Union (EU) is a
binding contractual framework of the process of Kosovo accession to EU. In this regard, the
National Program for Implementation of Stabilisation and Association Agreement sets the
medium-term planning framework for fulfilling the SAA obligations.
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Medium-Term Expenditure Framework 2021-2023 summarises these key priorities of the
Government of Kosovo in the Declaration of Medium-Term Priorities and then relevant chapters,
covering all budget sectors, describing the approach on how to ensure funds to implement them
from the budget of Kosovo and financial assistance or loans from development partners. First
chapter of the Declaration of Medium-Term Priorities presents the general macro-fiscal framework
for the next three years and its basic principles. Other chapters summarise the Government
priorities based on the main planning documents, such as: Government Program, National
Development Strategy and sectorial strategies, Economic Reform Programme and National
Program for Implementation of SAA. Chapter three has been structured in a manner so as to be
aligned with MTEF sectors structure.
The main priorities will guide all budget organizations in preparing their budget proposals for
2021. According to these priorities, the budget organizations may include proposals for finalizing
or rationalizing the existing programs in order to ensure funds for programs with high priority for
socio-economic recovery, including the proposals for new policies. In special cases, proposals may
include requests for additional funding if such requests demonstrate a high impact on potential
achievement of Government objectives and priorities.
1.1.General fiscal framework for prioritization
Government Programme 2021-2023, National Development Strategy 2016-2021, Economic
Reform Program 2020-2022, and Stabilisation and Association Agreement between Kosovo and
EU represents the main documents that determine the orientation and development of Government
policies and ensure the basis for setting the policy priorities in the Medium-Term Expenditure
Framework 2021-2023.
In order to address the Government priority policies, and to enable sustainable economic growth
for the next three-year period, the short-term objectives of the fiscal strategy include:
Economic recovery: the main objective to ensure the post-pandemic economic recovery
include the implementation of recovery measures, but at the same time integration of
medium-term reforms in order to ensure a stable recovery. Thus, the Government will
ensure the protection of jobs, supporting small and medium-sized enterprises and
employees in the informal sector through the economic response and recovery programs.
Social protection, with a special emphasis on healthcare: COVID-19 pandemic
highlighted the importance of health in particular and its possible impact on socio-
economic development. Therefore, it is necessary to continue investments in health, ensure
efficient policies for social protection, reduce poverty and various forms of discrimination
in incomes.
In order to ensure a stable recovery, the Government will integrate the medium-term priorities,
which include as follows:
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1.1.1 Public finance management: In order to ensure stability and economic growth, the
Government of Kosovo will undertake several steps in this regard, such as: (i) increase of non-
taxable personal incomes threshold by reviewing the fiscal policies and amending the relevant
legislation; (ii) reviewing the legal and institutional framework in view of collecting revenues
within the territory of the state: (iii) decreasing the threshold of cash transactions in order to
intensify the fight against the fiscal evasion, which would result in a fair treatment for economic
entities, increase of tax revenues and formalization of employment; (iv) ensuring accountability
for more effective use of public funds; (v) increasing efficiency and effectiveness of public
procurement, strengthening the electronic procurement and increasing transparency of public
tendering.
1.1.2 Business environment and entrepreneurship development: This objective aims at
ensuring the institutional support for enterprises, as one of the main engines for economic growth
in Kosovo, ensuring an equal environment, eliminating monopolies, eliminating the fiscal evasion,
ensuring the supply of electricity with affordable prices and, in particular, making on time
payments for enterprises performing works contracted by the public authority. Also, this objective
is focused on the public enterprises, aiming the improvement of their management and
performance.
1.1.3. Labour market and employment – The priority of this objective is to improve the
employment services, increasing the effectiveness of active labour market measures, improving
the employees’ rights and guaranteeing the minimum standards for occupational safety and health.
This will take place in compliance with the international standards by improving the legal
framework, namely labour and labour inspectorate law and by developing the information system
for labour market.
1.1.4. Advancing policies in the agricultural sector: The Government aims the definition of clear
criteria and full transparency, focusing on yield rather on surface – in compliance with the existing
circumstances for increasing the productivity and quality, resulting in the increase of
competitiveness. Increase of transparency in application, assessment, monitoring/inspecting and
payment of subsidies and grants will be prioritized. Also, the development of agro-processing
entrepreneurship, along with the need for skills development in the sector of food industry, will be
treated with priority. As a result of increase of demand for occupations in the field of food
processing industry, it should be considered the treatment of the possible gap between skills and
need for developing professional standards in this sector.
1.1.5. Prioritization of wide-scale investments for modern infrastructure and energy
infrastructure – Prioritization will be based on the level of impact on transforming the economic
structure in the country. Energy infrastructure, road, rail and air transport, water and irrigation
networks and waste water treatment will be prioritized in budgeting. Investments in energy are
planned to be made by including the private sector by reducing the energy costs that will support
businesses and further promote private investments.
A special importance will be paid to the need to address horizontal priorities for ensuring
economic, environmental and digital transformation, as competitiveness vectors. Transition to
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green policies and digital transformation should be presented as horizontal priorities in main post-
recovery reforms.
1.2. Basic principles
Process for preparing the expenses projection for 2021-2023 is guided by the following principles:
o Greater matching with the Government priority policies contained in the National
Development Strategy (NDS) 2016-2021, Economic Reform Programme (ERP) 2010-
2022, National Program for Implementation of Stabilisation and Association Agreement,
as well as Government Programme 2020-2024.
o Allocation of budget for purposes that are more effective in achieving the objectives of
Government policies;
o Achieving greater value for funds spent achieving specific priority objectives by
reorienting the funds to high-level priorities;
o Linking to external funding provided through IPA and other channels;
1.3. Priority fields
The Government of Kosovo presents the following declaration of priorities in relation to MTEF
2021-2023, reviewed in August 2020. Priorities have been specifically presented by considering
the need to reorient priority policies in order to implement measures under the economic recovery
program, but also considering the integration of medium-term priorities for a stable recovery.
When preparing and submitting their budget requests for 2021 along with the projections for
medium-term period (2021-2023), budget organizations are expected to show how their budget
plans respond to the Government priorities presented below. Priorities have been presented for all
sectors of the Government, addressing thus the most important issues in which the Government
should focus during the next three-year period. With regards to the priorities given, the budget
organizations are encouraged to improve the spending effectiveness by ensuring reallocation
within the existing limits.
1.3.1. Governance and public administration
The Government will continue to highly prioritize the implementation of public administration
reform and local governance. By furthering the implementation of reforms so far, the Government
will treat with priority the modernization of administration through digitalization, thus providing
better services.
o Planning, policy-making, accountability and transparency – The main focus is on
improving the strategic planning, increasing quality of sectorial planning with performance
indicators, thus advancing the policy monitoring and assessment policies. Data-based policy
development will be supported by applying the methodology to assess the impact of the
policies undertaken. A special attention should be paid to the building of institutional capacities
to develop reliable statistics, in compliance with the European practices and standards. These
will also be supported by increasing transparency and involving citizens, media, civil society
and private sector in policy development. The Government will support the process of
administrative burden reduction by eliminating the excessive bureaucracies according to the
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relevant Concept1 Document. In this regard, the Government will initiate the program for
administrative burden reduction with current legislation measurement through the Standard
Cost Model. In addition, the Government will further the process initiated to simplify,
eliminate or merge permits and licences.
o Public finance management – In compliance with the strategic framework and obligations
within the European integration agenda, the implementation of priorities within a
comprehensive macro-fiscal policy, which ensures stability and economic growth, will be
ensured. Fiscal policies will be oriented in that way as to ensure support for economic sectors
affected by the pandemic crisis during 2020.
o Modernization of public administration – A priority is to build an optimal administration
with regards to the size, including the functional review of institutions, agencies and other
independent bodies. Another objective is the advancement of public administration reform, in
view of bringing the government closer to the citizens, fully functionalizing the e-governance
to facilitate the access to services in all government departments, as well as conditions for
adequate and optimal functioning of the local government.
o Local government – In order to address the existing challenges, local self-government system
will be functionally reviewed and the legal framework concerning the local self-government
will be further supplemented. Amendments to the legislation, which affect the interests of non-
majority communities, will take place in close consultation with and involvement of
community representatives.
1.3.2. Foreign policy and Euro-Atlantic integration
o Foreign policy and diplomacy – Priorities will be focused on strengthening the diplomatic
relations with USA, EU and strategic partners, determining the specific fields of cooperation
with countries that have recognized the Republic of Kosovo, as well as priorities for
membership in international institutions and organizations. A special attention will be paid to
the five EU countries that have not recognized Kosovo yet and it will be worked to open the
ways of communication with states with influence, such as Brazil, Indonesia, Nigeria, Mexico,
Kenia, Chile, etc. The public diplomacy, strengthening of mechanisms for promoting the
history, tradition and culture of our country will also be supported. Economic diplomacy will
be functionalized as well.
o Euro-Atlantic integration – The Government will intensify the work in cooperation with
strategic partners. Involvement in the Partnership for Peace, as an instrument relevant for
strengthening the cooperation with NATO and direct contribution for peace and safety is a
medium-term priority of the Republic of Kosovo. The membership to NATO is the strategic
purpose of Kosovo. The Government will engage to actively participate, with its specialized
military and civilian capacities, in supporting the peace, stability and safety anywhere in the
world.
1 Concept Document on Reduction of Administrative Burden, adopted by the Government with the Decision No.
03/05, dated 06.03.2020.
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European integration agenda will be integral part of the Government agenda. European
integration will be fully synchronous with comprehensive development agenda for the country;
efforts to apply reforms for fulfilling obligations deriving from the SAA, including the visa
liberalization process as one of the highest priorities of the Government, as well as obligations
deriving from the ongoing dialogue for coordinating policies with EU, will be intensified.
o Good neighbourhood and regional cooperation – The Government aims to build good
relations with all neighbour and regional countries. Kosovo is committed to further deepen the
strategic partnership with Albania, ensuring mutual cooperation in the field of economy and
energy, education, art, culture, foreign policy and safety, sport and tourism. Dialogue with
Serbia will be developed as a process where Serbia and Kosovo will be treated as equal parties,
based on the full reciprocity and fully adhering to the international law. In the framework of
its regional policy, the Government will commit to participate in SEECP, RCC, RACVIAC,
MARRI, A5 and other regional organizations.
o Diaspora – The Government will commit to increase the role of Diaspora in developing and
promoting the country by directly engaging them in the development agenda; strengthening
the schools in Albanian language throughout the world; promoting the national language,
history and culture. The Government will increase the role of Diaspora by enabling its political
representation in decision-making processes in Kosovo. In particular, the Government will
work in engaging experts and researchers from Diaspora, thus enabling the transfer of their
skills and strengthening their connections to the homeland, i.e. immigration of “brain”.
1.3.3. Protection and security
The Government will treat with priority the protection and safety and will increase the budget for
these fields. In this regard, the building of capacities of country’s institutions for protection and
safety will be supported, the legal framework will be improved, and safety and protection policies
will be developed by determining the main principles and orientations of the Government in this
field.
o The Government of the Republic of Kosovo is committed to build capacities for protection and
safety in order that, at the time of peace and crisis, the military and civilian authorities
cooperate to protect the interests of Kosovo.
o The Government will engage to ensure that the armed forces participate in joint military
trainings with NATO member states. It will continue the support to ensure the professionalism
and provision of military equipment according to NATO standards, based on Comprehensive
Transition Plan.
o Also, one priority of the Government is to increase professionalism and capacities for
protection against eventual hybrid and cyber attacks coming from inside and outside the
country.
1.3.4. Order, law and public safety
In order to ensure the functioning of the rule of law, protection of freedom, economic development
and equality before the law, the Government will treat with priority the further improvement of
the legal and institutional framework, necessary infrastructure and strengthening of capacities.
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o Public order and safety – A priority of the Government is to strengthen the capacities to fight
all forms of crime, increasing the integrated financial investigations and modernization of
police equipment. In particular, it will support the strengthening of capacities to prevent and
fight against terrorism, human trafficking, narcotics and engagement in implementing the
concept for integrated border management. Another priority of the Government is the full
revision of the strategic framework for the public order and safety.
o Human rights, gender equality and communities – A priority of the Government is to
establish equal and non-discriminating opportunities, respecting human rights, strengthening
the mechanisms for gender equality, protection from domestic violence, free legal aid,
compensation of war crimes victims, integration of marginalized groups and freedom of
expression. Also, a special focus will be paid to the establishment of mechanisms for
identification of war crimes in Kosovo.
o Revision of justice system – Another priority in the sector of justice is the revision of justice
system, namely the drafting of sectorial strategy for justice. Also, the establishment of
Commercial Court, strengthening of free professions, adoption of the Civil Code, regulation
of ownership issues, strengthening of state advocacy, review of the criminal legislation and
establishment of the criminal records centre represent another priority of the Government. Law
on Control and Confiscation of Inexplicable Wealth.
o Fight against organized crime and corruption – Another main priority of the Government,
which will be supported by increasing capacities of institutions, is the strengthening of the
existing mechanisms. With regards to the institutional accountability, the priority of the
Government is to complete the legislation for protection whistle-blowers and building
capacities for handling cases of whistleblowing.
1.3.5. Economic issues
Economic development will rely on the private sector, which represents the basis for stable
economic development by promoting the free competition as facilitator and regulator of economic
development, based on national development priorities, paying a special care to the environment
and digital transformation. Also, work will be done in creating the conditions for sustainable and
dignified employment. In this regard, Kosovo will prepare a clear long-term strategic orientation
for development, setting the development priorities and economic, fiscal and budget policies
frameworks and public debt that exceed a governing mandate.
Transport and telecommunication
o Infrastructure – In order to integrate short-term and medium-term measures for sustainable
recovery, the Government will continue investments in infrastructure, namely important
projects of road and rail transport by also integrating in regional and international infrastructure
networks. The Government will work in building the nationally important infrastructure that
connects Kosovo regions and those ensuring economic growth. The Government will also
work for developing a long-term strategic plan, whereby setting the main infrastructure
priorities and considering the budget opportunities for the coming years, in particular due to
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the situation created from the economic downturn due to the COVID-19 pandemic. In order to
ensure a sustainable infrastructure, the Government will work for increasing the safety level in
road traffic and will also improve the planning and programming of works for road
maintenance through the Intelligent Transport System (ITS).
o Information and Communication Technology (ICT) – Investments in ICT infrastructure
represent an important precondition for digital transformation of the country. In addition to the
investments in infrastructure, it is important to prioritize the digitalization in the education
system both in terms of infrastructure and skills, according to the trends and demands of
technology market. In order to implement the recovery measures, technology institutions and
new and existing companies dealing with technology will be supported. For a comprehensive
transformation, the Government aims at creating incentives for individuals and companies
dealing with innovation and new technologies.
Energy and mines
o Securing sustainable electricity supply remains a priority of the Government and this will be
addressed initially by rehabilitating the existing capacities and looking for opportunities for
new generating capacities, including renewable energy sources. Full electricity market
liberalization is a priority of the Government in order to enable a competitive, transparent and
consumer-oriented market. Also, it will be worked for integration in the regional market, thus
enabling the optimization of Kosovo-Albania systems, as the first step towards the integration
of Kosovo in the regional electricity market and access of Kosovo to gas pipelines.
o Reduction of energy consumption through efficiency measures - The Government will
continue to provide support for investments in energy efficiency, as an essential component of
strategic planning and orientation for economic development of Kosovo and implementation
of district heating networks in the cities of Kosovo; completion of legal framework for energy
efficiency; functionalization of Fund and increase of incentives in the private sector and
households.
o Use of mineral resources – It is important to establish a strategic approach for development
of mines based on market mechanisms and partnerships. It will be worked in the new lignite
mine in order to ensure secure lignite supply of existing and new generating capacities. The
analyses necessary to complete the feasibility study, including the assessment of assets and
responsibilities/obligations of Trepça, as well as valorisation of mineral reserves employing
local and international expertise, will be completed. Business activities/industrial production
of Trepça will be furthered by relying on the most economically, technologically, socially and
environmentally reasonable alternative.
Balanced regional development
o Work will be done towards the concept of balanced regional development, focusing on
capacity building of municipalities that have economic potential to ensure economic and social
convergence. It is necessary to take measures to increase competition between different
development regions / areas of Kosovo, in order to achieve higher levels of productivity,
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employment, welfare and equity. The main priorities will focus on developing instruments to
foster greater competition between regions and addressing regional inequality in terms of
socio-economic development.
Support to industry and business
o Agriculture and rural development - Government policies in the agriculture and rural
development sector will focus on supporting the agricultural sector, starting with primary
production, storage, processing and marketing as final products. The focus of the government
will be to ensure alignment of the agricultural development policies with the EU Common
Agricultural Policies.
o The government will provide farmers and agribusinesses with investment opportunities
through grant and subsidy schemes by boosting the fund for subsidies and grants for crops with
export potential. Measures will be taken to make agricultural insurance operational as soon as
possible in order to avoid unexpected losses of farmers. The preservation of agricultural land
will be followed by strict implementation of the legal infrastructure and incentive measures for
producers so that they see an interest in preserving arable land.
o Agricultural infrastructure - intensive investments will be made in irrigation systems of
agricultural lands. Using the agricultural land registration data, it will be possible to accurately
plan the layout of the irrigation network and use it in the most efficient way. In this regard,
work will be done on making operational (rehabilitation) the existing irrigation canals and the
expansion of two main irrigation systems: Iber-Lepenc that would cover fields in the Kosovo
Plain with irrigation system and Radoniq that would cover fields in the Dukagjini Plain with
irrigation system.
o Food safety - A functional system of food safety and consumer protection in line with EU
standards will be strengthened with high priority. To this end, appropriate measures based on
the concept "From farm to fork" will be implemented, thereby ensuring an effective and safe
operation of the production and marketing chain.
o Industrial policies and private sector development - The government will facilitate doing
business and empower the private sector as an employment generator; The advancement of
industrial policies in general and the provision of quality infrastructure, the upgrading of
production standards as well as the strengthening of industrial property rights will be
supported.
o Tourism development - priority will be given to infrastructure improvement projects (road
infrastructure, rehabilitation of river beds and tourist paths) that would enable the development
of tourism, and revalorization of tourism potential through public-private partnership, based
on international standards.
o Fostering, promotion and support of foreign investments - will be addressed by
eliminating barriers to foreign investment; improving the legal framework; developing
16
capacities to promote and support strategic and foreign investors, especially those with an
export orientation. A special package to promote diaspora investment will be developed.
o Trade policies - in the context of these policies, the priorities is to commit for the
implementation of obligations in the framework of regional cooperation, improvement of
legislation, improvement of product quality, consumer protection, and intellectual property, as
well as relevant areas that result in increasing production, improving the trade balance,
innovation and economic development of Kosovo in general. Priority will also be given to the
development of procedures for membership in regional and international organizations, the
negotiation of trade agreements with regional countries and other countries.
Research, development and innovation
o The Government of Kosovo aims to increase support in the field of research, development and
innovation. This is intended to be achieved through: completing and aligning the legislative,
institutional and policy framework for research, innovation and information technology with
that of the EU, as well as completing the smart specialization process; drafting incentive
policies to support information and communication technology; Reorganization of the
Innovation Fund to provide investment grants for SMEs that innovate and Strengthening of the
"Voucher Scheme" instrument for Innovation, providing funding for professional advancement
for innovative firms.
Labour market and employment
o The government aims to address the effects in the field of the labour market and employment,
caused by the COVID-19 pandemic through an Operational Plan for the implementation of the
Economic Recovery Program. In this regard, this plan envisages the increase of employment,
in particular of specific groups of workers with lower probability of employment through the
following measures: wage subsidies for new workers hired by businesses; professional support
for businesses operating in pandemic conditions, such as work from home, online work, digital
transformation; supporting manufacturing and service businesses with equipment and
machinery to automate processes and increase their productivity. The Government will also
focus on improving workers' rights and guaranteeing minimum standards for safety and health
at work; continuous training in vocational schools for occupations required in the labour
market; promoting internships in the private sector as a form of professional and practical
training of interns; grant support for start-up businesses for young entrepreneurs;
modernization of the infrastructure of vocational training centres.
1.3.6. Environment
Kosovo needs remediation and improvement of the state of the environment. The government will
focus its policies on advancing the preservation and protection of the environment, advancing
water management and improving infrastructure, and developing policies to advance spatial
planning, improve waste and water management, and sustainable use of natural resources,
biodiversity protection and natural landscapes.
17
o In order to ensure advancing the preservation and protection of the environment, the
Government of Kosovo will review and implement policies to improve air quality; biodiversity
conservation; protection and sustainable development of the environment. All these policies
should be addressed horizontally in other sectors to ensure the green transition, according to
the Green Deal of the European Union.
o Advancing water management and building infrastructure - key challenges in water
management will be addressed, including the state approach to water accumulation, new hydro
systems, and protective infrastructure along rivers. Drinking water will be a priority and the
objective will be to cover the entire population in the supply of drinking water. In terms of
wastewater, plants will be built in certain municipalities of the country and the accumulation
lakes used for drinking water will be protected. Agricultural land irrigation systems will be
expanded to two main systems, Iber-Lepenc and Radoniq, as well as the design and
construction of new irrigation systems using a large part of rivers.
o Protection and valorisation of forest resources - For environmental, productive and other
purposes, priority will be given to protection of forest resources from degradation and
afforestation of new areas; interventions will be made with afforestation programs of new
areas, as an urgent need. Existing legislation that will enable rational use of forests will be
reviewed, in addition to the continuous afforestation of new areas.
o Development of policies for the advancement of spatial planning - in terms of development
and advancement of spatial planning, the Government plans to complete and approve of the
Zoning Map of Kosovo; review of the Spatial Plan of the "Sharri" National Park; Spatial Plan
of the National Park "Bjeshkët e Nemuna"; as well as the functioning and advancement of the
SPAK system for the needs of MESP.
1.3.7. Health
The focus of the Government will be on COVID-19 pandemic management but in addition the
health system will be developed to provide quality services to citizens. The priority is to build an
effective health system, based on sustainable human resources and with a sustainable funding,
which ensures equal access to quality and cost effective health services for all citizens.
The reform of the health system will focus on increasing the efficiency of health institutions at all
levels, improving the infrastructure and tools, functionalization of health insurance, optimal use of
professional resources, better integration of health services at all three levels of health care, as well
as the development of managerial capacities in terms of increasing accountability and
transparency.
In order to address the shortcomings of the health system, the Government's priorities for the next
three years will focus on the following:
o Reorganization of the health sector and provision of quality health services - by advancing
basic policies and legislation in the health sector, the Government will prioritize the integration
of three levels of health care. This will be accompanied by investments in infrastructure,
equipment and the provision of adequate human capacity for the health system.
18
o Ensuring sustainable health financing - this priority aims to reform the financing of the health
sector through the establishment of a mixed funding model, from the Kosovo Budget and the
Public Compulsory Health Insurance Fund, supplementing and amending health insurance
legislation; the adoption of secondary legislation to determine the criteria for exemption from
the payment of health insurance contributions.
1.3.8. Youth, culture and sports
As part of its medium-term policies, the Government will continue to support the development and
promotion of culture, youth and sports. Also, due to the pandemic, based on the Plan for the
implementation of the Economic Recovery Program, the Government has foreseen the measure
for financial support for youth employment, support of civil society organizations, other informal
groups, stimulation of cultural and artistic activities, sports and their revitalization through the
preparation of criteria which define the sectors / institutions and conditions for benefiting from
this measure. Thus, the Government will support the following priorities:
o Improvement and further modernization of cultural infrastructure - in order to promote
the development of works of art and culture, the improvement of cultural infrastructure will be
supported.
Financial support for arts and culture - The government will transform the planning and
distribution system of funding for arts and culture, increase subsidies for independent artists
and artistic and cultural events, support cultural institutions of performing arts and provide
artists with appropriate working conditions.
o Protection and promotion of cultural heritage – this is intended to be achieved by completing
the legal framework for cultural heritage and museums, implementation of the Strategy for
Preservation and Promotion of Cultural Heritage 2017-2027; the functionalization of all state
institutions dealing with Cultural Heritage, including the establishment of new institutions.
o In the field of youth the government will support capacity building and financial support for
youth organizations and youth representation mechanisms through the establishment of an
adequate regulatory framework, as well as marginalized youth groups; schemes will be
developed to support youth employment, subsidize young entrepreneurs, facilitate the
transition from school to employment, internship opportunities and support for innovative
projects; recognition of volunteer work, support for cooperation with international youth
organizations, including support to youth from non-majority communities.
The government will continue to support sports by focusing on modernizing sports infrastructure,
developing sports talents and internationalizing sports. These will be the priorities for the next
medium term:
o Modernization of sports infrastructure - investment in modernization and rehabilitation of
sports infrastructure, construction of athletics trails in major centres of Kosovo, construction
of a national stadium with UEFA / FIFA standards and football auxiliary fields, construction
of sports grounds in schools and neighbourhoods and will promote investments in sports
through public-private partnerships.
19
o Support for sports education - will work on the functioning and advancement of school sports;
sport for all will be promoted, sports medicine strengthened, by strengthening the anti-doping
agency and the sector for anthropological and scientific research in sports. The licensing
database of the sports system in Kosovo will be created; in particular, work will be done on
advancing the sports legal framework in cooperation with sports federations, on the regulation
of rewards for special achievements, the regulation on scholarships.
1.3.9. Education and science
In the next three years, in addition to the measures envisaged to address the effects caused by the
COVID-19 Pandemic, the government will focus on enhancing the quality of education at all levels
as well as linking the skills acquired in the education system with labour market needs. A greater
role will be given to science by strengthening the relevant mechanisms and policy framework.
Whereas, in terms of addressing the effects caused by the COVID-19 Pandemic financial support
is foreseen for the education sector under the operational plan for the implementation of the
Economic Recovery Program to enable the successful start and smooth running of education
during the academic year 2020/2021, as well as the way of mode of organizing learning by
enabling on-line learning. The Government's priorities for education for the next three years will
focus on as follows:
o Early childhood education - increase the involvement of children aged 0-5 years in pre-school
education by: expanding the network of institutions in pre-primary and pre-school education
across the country by assisting municipalities in their planning and construction; arranging the
way of financing; licensing and relicensing of public and private preschool institutions;
Completion of the legislative framework as well as the curriculum for early childhood
education, in cooperation with the municipalities capacities for the psycho-social development
of children will be created and the inclusion of children from the Roma, Ashkali and Egyptian
communities will be increased.
o Increasing the quality of teaching in primary and secondary education - aims to be achieved
through integrated school management by returning the school to the community and its full
integration into the community: improving the infrastructure and making the educational
infrastructure available to the benefit of the community; reviewing the legislative framework
at this level of education as well as the payroll system to increase the importance of
performance and commitment; evaluation of educational curricula; strengthening school-based
decision-making with greater community involvement and strengthening the parent-teacher-
student relationship; filling cabinets with the latest technological equipment and digitalization
of educational content; capacity building of pedagogical evaluation teams in municipalities;
the first steps will be taken towards full-day education in all Kosovar schools; professional
development of teachers and early retirement of the elderly staff;
o Increasing the quality of vocational education and training - this priority is intended to
be met by increasing cooperation between vocational schools and the business community;
appropriate curricula and textbooks based on a review of occupational standards and the
20
network and profile of these schools will be reviewed, based on a development strategy
that takes into account the demands of the labour market in Kosovo and beyond;
development of internship programs in cooperation with companies in the framework of
dual education at school and at work; strengthening the centres of competence with
adequate laboratories, equipped with the necessary materials; start-up centres will be
developed within the school and the establishment of digital schools will be considered;
cooperation with regional chambers of commerce and crafts, as well as with professional
associations that provide profiles and skills exclusively for the needs of companies in the
respective regions, as well as programs with flexible approaches will be developed in
response to the requests of companies; the career guidance system will be made
operational.
o Better quality and management in higher education - this is intended to be achieved this is
intended to be achieved by making legal and institutional changes; legal mechanisms will be
established for the departmentalization of the management of higher education institutions; the
fund of excellence will be created; participation in various international programs; new public
universities will be profiled; the ranking of higher education institutions as well as the
integrated information system will be done; strengthening the Kosovo Accreditation Agency
through the issuance of a special law on the Agency and building its professional capacity; a
clear legal basis and competitive criteria for higher education funding will be established;
strengthening participation in regional and international academic mobility programs,
including teachers, students and researchers at home and abroad.
o Science -. support will be increased for all higher education institutions to undertake scientific
activities as part of the promotion and quality assurance of teaching; institutions and teaching
staff will be encouraged to engage in scientific activities by supporting publications, various
applied research, promoting international collaborations
1.3.10. Social protection
The Government considers that the state of general social welfare and inter-social solidarity, built
on the principles of social dialogue between the main participants and on the basis of the free
market, will be the basic principle of the development and implementation of the Government's
social policies. Through the implementation of adequate policies in the field of social protection,
the Government aims to achieve full coverage for all citizens with social schemes, maintain the
standard of living of certain groups of society and ensure a financially stable social and pension
system.
The COVID-19 pandemic has highlighted the importance of health in particular and the impact it
can have on socio-economic development. Therefore, it is necessary to continue investing in
health, to ensure effective policies for social protection, poverty reduction and various forms of
income discrimination.
21
SECOND PART
1. MACRO-FISCAL FRAMEWORK Medium-Term Expenditure Framework 2021-2023 is based on a macro-economic scenario that
projects a rebound of economic growth in the country in 2021, from the COVID-19 pandemic,
followed by a trend of normalization towards historical levels in the next two years.
Economic growth is supported by a combination of increased internal and external demand.
However, there are a lot of uncertainties and downward risks over the medium term, which are
mostly related to the duration and magnitude of the current pandemic situation and the measures
or policies taken by the relevant authorities to fight this pandemic.
Government of the Republic of Kosovo is constantly oriented towards the macro-fiscal stability
and the deficit level is projected to comply with the fiscal rules towards the end of the medium-
term. However, it is worth mentioning that the crisis due to the COVID-19 resulted in temporary
change of the fiscal rules in order to overcome this crisis. The Government Decision No. 03/02,
dated 05.06.2020, has approved the request for temporary overcoming the budget deficit ceiling
up to 6.5percentof GDP and lowering the useful banking balance ceiling up to 3percentof GDP
due to the deterioration of macro-fiscal parameters from the global situation with COVID-19
pandemic.
In this context, the medium-term fiscal objectives of the Government aim at facing with the crisis
caused by the COVID-19 pandemic. Post-pandemic economic recovery represents one of the main
objectives aimed to be achieved through the Economic Recovery Programme.
2.1. MACRO-ECONOMIC FRAMEWORK
2.1.1 External economic environment
Recent problems due to the COVID-19 pandemic overshadowed the trade problems between USA
and China of 2019 (which resulted in world-wide decline in the production sector). Given that this
global crisis, unlike the financial global crisis in 2008, has an impact on our economy, the external
economic environment requires more detailed analysis given that there are several channels
through which crisis effects may be transferred to our country, such as: trade, remittances, foreign
direct investments and eventually the financial sector.
Uncertanties resulting from this crisis are evident and can be seen among ongoing (downward)
revisions of macroeconomic projections. In the WEO publication in June (IMF)2, global economy
in 2020 is projected to mark a decline for 4.9 percent in actual terms, a downward revision of 1.9
percentage points compared to the publication of April 2020. With regards to the developed and
2 World Economic Outlook, June 2020: https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
22
developing economies, it has been projected a decline of GDP of 8.0 and 3.0 percent, respectively.
These two have been revised downward from -6.1 percent and -1.0 percent, respectively. The main
reason for these revisions is more significant negative impact in the first half of the year (compared
to the initial expectation) and more gradual or slower recovery in the second half of the year.
The IMF projects that the most negative impact of this crisis will be felt by the lower income strata.
This projection is in line with most of literature on the economic crisis effects on lower income
strata. Some of the reasons include that the poorer strata in many states have shorter employment
contracts or work in the informal market and consequently make it difficult to be assisted by the
state. Another characteristic of this crisis is the shock to demand as a result of the initial shock to
supply. In most of the countries affected by this crisis the consumers started using their savings or
assistances from families to cover consumption costs. Specifically, the service consumption
decreased because numerous service industries, activity of which requires closer physical contact,
have suffered from closure restrictions and fear of consumer that they can be infected therein.
However, consumption is not considered to have experienced a significant decline compared to
investments. Decline in sales, disturbance of supply chains and market uncertainty have had and
will have an impact on investment reduction. This development can have an adverse impact on the
long-term because the lack of investments may reduce the potential GDP.
Finally, a characteristic of this crisis is the impact on the labour market. Based on the data of the
International Labour Organization, the global decline of working hours during the first quarter of
2020, compared to the fourth quarter of 2019, was equivalent to the loss of 130 million full-time
jobs3. In the second quarter of 2020, this digit is estimated to be more than 300 million full-time
jobs. As mentioned above, it is impossible for low income strata, which often perform low-skilled
works, to work from home. Consequently, these workers are mostly affected by this crisis in the
labour market. In order to better illustrate the level of this crisis, it is worth comparing some figures
of the public and fiscal debt with the same variables from the 2008 financial crisis. Global increase
in the public debt (as percentage to GDP) during 2020 is expected to be nearly 18.7 percentage
points, whereas the total global balance (as percentage to GDP) is expected to fall for 10.05
percentage points. Both these digits have doubled compared to the peak of financial crisis in 2009.
Regarding inflation, according to the projections published on the WEO of April 2020, in
developed economies it is expected to be 0.5 percent during 2020 (during 2019 it was 1.4 percent),
and 1.5 percent during 2021. On the other hand, in developing economies, from 5.0 percent in
2019, it is expected to drop to 4.6 and 4.5 during 2020 and 2021, respectively. However, by April
2020, inflation in developed and developing economies was 0.4 percent and 4.2 percent,
respectively. The main reasons for the downward trend in prices are weakened aggregate demand
and dropping of oil prices.
During 2020, prices generally have a downward trend. The commodities index price fell by 8.9
percent and 23.4 percent (y-o-y) during the first and second quarters of 2020, respectively. While
3 Ibid.
23
the price of oil has an even more pronounced downward trend during the same periods - 20.1
percent and 54 percent (y-o-y) during the first and second quarter of 2020, respectively. Whereas,
only the month of July 2020, compared to the month of December 2019, decreased by 35 percent.
Finally, in terms of nickel4, its average price in international markets did not change much during
the first and second quarters of 2020, compared to the same period of last year.
Table 1 Prices in international markets
In terms of developments in Europe, according to summer publication of European Commission
(EC) forecast7, the crisis the EU economy was going through during the first half of 2020 was the
worst crisis since World War II. As in all other economies, as in this case, the main reason for this
shrinking in economic activity and consequently in GDP was the need to lockdown the economy
for certain periods (varying from economy to economy). The EC forecast also shows a downward
trend - the Euro Area economy in the spring publication of EC projections was expected to shrink
by 7.7 percent, while in the latest publication this figure reaches -8.7 percent. Further, economies
like Germany and Switzerland, the two countries from where over 60 percent of remittances in
Kosovo originate, are expected to decline in 2020 by 6.3 and 5 percent, respectively. It is worth
noting that these figures in previous publications were 7 percent and 6 percent, respectively.
Nevertheless, all medium-term projections depend on one key development - the development of
a vaccine for the COVID-19 virus. Also, projections for this period face two uncertainties: how to
operate within an economy facing a pandemic, and pandemic developments (such as: vaccine
development, the need for additional lockdown, virus behaviours in the environment and changing
weather, and the lack of definitive information on many other topics related to the COVID-19
virus.
4 More than 35 percent of Kosovo’s goods exports are within the category of ‘Base metals and articles of base metals’ – a category which is
dominated by the export of nickel. 5IMF Portal on Primary Commodity Prices: https://www.imf.org/en/Research/commodity-prices 6WB Portal on Primary Commodity Prices: https://www.worldbank.org/en/research/commodity-markets 7European Economic Forecast, summer publication 2020: https://ec.europa.eu/info/sites/info/files/economy-finance/ip132_en.pdf
2018 2019 2020
Avg. Q1 Q2 Q3 Q4 Q1 Q2
Commodities Index price (IMF Primary Commodity Prices)5
128.2 118.9 120.2
115.4
116.6 108.2 91.8
Consumer Index Price (IMF Primary Commodity Prices)
101.3 98.9 99.8
97.9
99.1 100.5 95.6
Crude oil price, Brent (BB Pink Sheet)6 71.1 63.3 68.3 61.9 62.7 50.5 31.4
Nickel, $ per metric ton (BB Pink Sheet)
13,114 12,412 12,244
15,651
15,349 12,690 12,237
24
Graph 1 Economic growth in other countries
2.1.2. Latest Developments in the Kosovo Economy
According to preliminary quarterly data from the Kosovo Agency of Statistics (KAS), real GDP
during 2019 increased by 4.2 percent compared to the previous year.
However, economic indirect indicators show that 2019 was a year of a slower economic activity
compared to the preliminary data from KAS. Consequently, MF has estimated that the real growth
in 2019 was 4 percent, in line with the developments in these indicators. Further, it is expected that
the data revision from KAS in its annual publication of GDP to reflect these expectations.
According to the latest KAS publication regarding national accounts, the Gross Domestic
Product for the first quarter of 2020 has marked a real increase of 1.29 percent, compared
to the same quarter of the previous year. This increase is significantly lower than the historical
average (in the last five years) of 4.0 percent, which is attributed to several main reasons:
1) the political stalemate that characterized Kosovo's economy at the beginning of the year, the
most obvious effect of which was reflected in the slow dynamics of capital investments, and is
estimated to have contributed to the increase of uncertainty in the country;
2) the beginning of implementation of restrictive measures in the country, in the second half of
March; and
3) the negative effect that the external economic environment has had on Kosovo's economy
through trade channels, remittances or foreign direct investment. It is worth mentioning that
pandemic and restrictive measures undertaken in this regard, in many European countries and in
neighboring countries of Kosovo appeared earlier than in Kosovo, worsening the external
economic environment since early 2020 (January-February).
-9.0
-7.0
-5.0
-3.0
-1.0
1.0
3.0
5.0
2016 2017 2018 2019 2020 2021
World Economy Advanced Economies European Union Euro Area Emerging and Developing Europe
25
Based on the preliminary data for the first quarter of 2020, consumption is considered to have
been almost at the same level as in the previous year (increase by 0.04 percent in real terms, as a
result of a slower increase in private consumption by 0.21 percent and decrease of the public
consumption by 0.17 percent. The slower growth in private consumption also reflects the slower
increase in workers' compensation receipts (primary income) by 6.9 percent (from 13.1 percent in
Q1 2019) and in secondary income by 5.7 percent (from 8.4 percentin Q1 2019). Investments
during Q1 2020 have decreased by 9.3 percent in real terms. This decrease supports the decrease
in public investment due to the political stalemate that characterized Kosovo’s economy at the
beginning of the year, which is reflected in the slow dynamics of capital investment, and is
estimated to have contributed to increased uncertainty in the country. This uncertainty was also
reflected in the decrease in private investment. Net exports during Q1 2020 had a positive
contribution to the real term increase of 3.7%, as a result of a more pronounced increase in total
exports and a slowdown in imports of goods.
Inflation of Consumer Prices has increased in average by 0.5 percent during the period January-
July 2020, with a declining monthly trend (from a positive rate of 1.5 percent in January, to a
negative rate of -0.7 percent in July). The main positive contribution during this period came from
the category of “Food and non-alcoholic beverages”, especially from the category of “Bread and
cereals”, “Meat” and “Fruits”, while the category of “Vegetables” has made a negative
contribution. The category of “Transport” (especially transport services) has marked a significant
negative contribution to price increase, being in line with oil price developments in international
markets during this period and the decline in economic activity. Deflationary pressures are also
attributed to the lifting of the 100 percent tariff on products imported from Serbia and Bosnia &
Herzegovina.
Current account balance during the period January – May marked an amount of -155.7 million
Euros, and represents a narrowing of the current account deficit by about 32 percent compared to
the same period last year.
Export of goods marked an increase of around 13.4 percent, while export of services marked a
significant annual decrease of 32.7 percent. Exports of goods is one of the only economic
indicators that has had a positive performance during the pandemic (except in April). Kosovo's
export structure currently remains focused on the export of base metals, which constitute about
44.7 percent of all exports of goods, which compared to the same period of last year increased by
43.0 percent. Other important sectors continue to be the category of plastic products with a share
of 12.1 percent in total exports, the prepared food stuff constituting about 8.1 percent of all exports,
and mineral products with a share of 5.8 percent in total exports. Also, the analysis of the
composition of exports according to the 20 largest exporters shows that export increase came
mainly from a major exporter, Newco Ferronikeli.
On the other hand, export of services marked a significant decrease of 32.7 percent, caused mainly
from the significant drop, especially during the second quarter of 2020, in export of Travel and
Transport services.
26
Import of goods and services market an annual increase of 12.2 percent during the period January-
May 2020. Import of goods marked a decrease of 11.9 percent, caused mainly by the downfall of
29.1 percent in import of mineral products, decrease of 24.1 percent in import of base metals, and
a decrease of 8.8 percent in import of machinery and equipments. The import of services has
marked a decrease of 13.5 percent, caused mainly from the significant downfall during the second
quarter of 2020 in import of Travel services as a result of situation created by COVID-19
pandemic.
The balance of goods
during the period January-
May 2020 has marked an
annual increase of 15.4
percent, while the balance
of services during this
period marked a decrease
of 49.9 percent. This
decrease in the balance of
services is mainly
reflected in the category of
Travel and Transport services.
Although current account data are available until May, the trade data are available until July. In
June, the performance of imports of goods has improved (increase of 5.6 percent, y-o-y), mainly
as a result of the relatively rapid opening of the economy after a total lockdown. However, in July,
imports of goods decreased again (by about 9.2 percent). Meanwhile, exports of goods continued
to increase as in previous months.
Primary income balance, during the period January-May 2020, remained at levels similar to the
same period of last year. Secondary income balance marked an annual increase by 6.7 percent.
An important role in this increase
have played the net remittances,
which marked an increase of 5.9
percent. The increase was more
pronounced during the second
quarter, and remittances during this
period were mainly through formal
channels.
The latest labour market data
show that the employment rate in
the first quarter of 2020 was 29.1
percent, which shows and
improvement of 0.9 p.p. compared to Q1 2019. The labour force share rate has remained almost at
the levels similar to the period of previous year (38.8 percent in Q1 2020, 38.7 percent in Q1 2019).
Graph 3 Labour market
-350.0
-300.0
-250.0
-200.0
-150.0
-100.0
-50.0
0.0
-1,500.0
-1,000.0
-500.0
0.0
500.0
1,000.0
2017 jan-may 2018 jan-may 2019 jan-may 2020 jan-may
Goods Services
Primary Income Secondary Income
Current Account Balance (right axis)
36%
37%
38%
39%
40%
41%
42%
43%
0%
5%
10%
15%
20%
25%
30%
35%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020Unemployment Rate (%)Employment Rate (%)Labour Force Participation Rate (%) right axis
Graph 2 Current account balance
27
Whereas, the unemployment rate has decreased by 1.9 p.p. in annual terms, reaching to 25.0
percent.
The banking sector
continues to experience an
accelerated growth in credit.
At the end of July, the stock of
loans amounted to 3.15 billion
Euros, marking an increase of
6.7 percent compared to the
previous year. The stock of
corporate loans increased by
6.7 percent, while the stock of
household loans increased by
6.8 percent.
At the end of July 2020, the
stock of total deposits
amounted to about 4 billion Euros, marking an annual increase of 13.6 percent. The stock of
corporate deposits has increased by 14.5 percent, while the stock of household deposits increased
by 8.2 percent. However, the level of non-performing loans reached 2.6 percent at the end of June
2020, and reflects deterioration in loan quality, from 2.4 percent in Q1 2020 to 2.6 percent in Q2
2020.
The average interest rate on loans during the first half of 2020 was 6.3 percent, about 0.2 p.p. lower
than last year. Whereas, the average interest rate on deposits was 1.5 percent, or at levels similar
to last year.
8 There is no comparison for 2019 since the quarterly data are preliminary until the annual publications of KAS
(September 2020).
Information Box 1. Comparing macroeconomic forecasts used for previous MTEFs with
actuals
Figure 1 shows the comparison between forecasts of main macroeconomic indicators provided
in previous MTEFs and their actual performance over the period 2014-20188 and helps in
identifying whether there is a systematic bias (either upwards or downwards) in the projections.
As shown in Figure 1, the projected nominal GDP growth rate for the first two years (2014 and
2015) is higher than the actual data mainly due to higher growth in consumption, exports and
lower growth in imports; while in 2016 this gap narrows considerably with GDP forecasted
being very close to the actual values. In 2017, the forecasts for GDP were more conservative by
being lower than the actual performance. While in 2018, the projected nominal GDP is higher
than the current one, although the gap between the two is narrower than in the past. This gap in
2018 is attributed mainly to expectations of total imports than the current value (about 5
percentage points lower), while expectations for other components of GDP have been lower than
Graph 4 Loans, deposits and non-performing loanse
2.2%
2.3%
2.4%
2.5%
2.6%
2.7%
2.8%
-
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
Jan-17 Jan-18 Jan-19 Jan-20
Credit Deposits NPL
28
9 In the context of Kosovo, the benefits of fulfilling direct tax liabilities and domestic VAT can overlap (coincide)
with the effects of macroeconomic variables affecting tax revenues.
current ones. It is worth noting that the gap between total export projections and inflation is at
levels close to zero during 2018.
Figure 1. Main Macroeconomic Variables 2014-2018: MTEF projections vs. Actuals
The figures above present some important issues for the budget forecasting process. Because
nominal GDP is used as a key macroeconomic variable that affects budget revenues, lower
current GDP values than those predicted usually9 have a negative impact on revenue collection
for those years compared to forecasts, especially for personal and corporate income tax
categories. Although the gap between projected consumption and current consumption has
narrowed significantly, it still leads to higher expectations for revenues collected from domestic
VAT. Imports, with the exception of 2015, have been underestimated, leading to lower forecasts
for revenues collected from VAT at the border and from customs duties. However, this is
partially offset by the positive effect that such an undervaluation of imports has on the projected
GDP and consequently on projections for other budget revenues (excise).
29
2.1.3. Macroeconomic Perspective 2021-2023
At the end of May 2020, the Ministry of Finance updated the macro-fiscal projections in the
framework of the Budget review for 2020. According to these projections, Kosovo's economy was
estimated to decline by about -3.0 percent with the largest shock reflected in the second quarter of
2020. This estimate constituted a downward revision compared to the estimates made in the initial
budget of 2020. As it has been stated several times in the document of the Law on Budget for 2020
(initial and revised), these projections are surrounded by high uncertainty.
Updating the projections with the latest available data suggests a deterioration in the short-term
economic outlook and an extension of the recovery time of economic activity. According to MoF
estimates, Kosovo's economy during the current year is expected to shrink by about 6.4
percent in real terms. The negative effect of the pandemic is expected to peak in the second
quarter of 2020, as a result of the closure of economic activities and other measures of social
distancing. Although during the third quarter of 2020, there has been a easing of measures to limit
the spread of the pandemic, economic growth will continue to remain in negative territory, as a
result of uncertainty about the future, the continuation of some of the restrictions (especially travel)
and the global nature of this situation, which is expected to further deepen the negative impact on
the domestic economy. However, the downward trajectory of our projections will be smoother
after the second quarter.
The decline in real GDP of 6.4 percent during 2020 is mainly attributed to the decline in private
investment (with a negative contribution of about 4.8 percentage points) and the decline in exports
of goods and services (with a negative contribution of about 5.5 percentage points). The latter
comes mainly as a result of the significant decline in exports of services (especially travel) by
about 27 percent in real terms, while exports of goods are expected to close the year with positive
growth, but with a growth rate lower than that occurred during January-July 2020. Private
consumption is also expected to have a negative contribution to real economic growth, by about
1.8 percentage points, as a result of declining disposable income and increased consumer
uncertainty about the future but also nature of restrictive measures to prevent the spread of
COVID-19. Public investment is expected to slow down compared to last year (with a negative
contribution to economic growth of about 1.1 percentage points) as a result of the situation created
by COVID-19 and as a result of an early year characterized by political stalemate, which led to
delays in the approval of the Law on Budget for 2020. Public consumption is expected to be
10 Limit of 4.5 percent of GDP of the Bank Balance applies only in those years when funds from privatization of
SOEs are used.
These divergences between projections and current figures of economic variables may have
contributed to lower revenues than projected. However, the budget balance and the bank
balance sheet continued to remain within the fiscal rules, where the budget deficit was less
than 2 percent of GDP and the bank balance was not less than 4.5%10 of GDP.
30
positive as a result of the increase in current expenditures (category of "goods and services" and
the category of "wages and salaries") within the accommodation of a number of emergency
measures undertaken by the government in order to mitigate the negative impact of the pandemic.
The contribution of imports of goods and services has been positive (6.1 percentage points), as a
result of the decline of two sub-components: i) the decline in goods being in line with the estimated
decline in consumption and investment; and ii) decline in services (especially travel) due to travel
restriction measures.
During 2021, Kosovo's economy is expected to grow at a real rate above its historical trend,
by about 5.4%, returning to the similar level recorded before the COVID-19 crisis (year 2019)
with the main contribution coming from private consumption (by about 3.2 percentage points);
private investment (by about 2.9 percentage points); to be followed by total exports, especially
services (with a total contribution of about 2.04 percentage points). During 2021, a faster dynamics
of public investment execution is also expected, while the contribution of public consumption will
be similar to 2020. However, the longer the period of social distancing or isolation lasts, the less
likely the economy is to recover according to a trajectory shown in Chart 6. Whereas, in the other
two years (2022 and 2023 ), real economic growth will fluctuate around its historical level of
4%. It is important to note that the assessment for the medium-term outlook of the economy
depends significantly on how 2020 will end and whether the recovery in 2021 will be slow and
partial or vice versa.
The Consumer Price Index is expected to fluctuate around the level of 0.5 percent during
2020, staying significantly below the level recorded in 2019 (2.7%). Inflationary pressures in the
category of "food and alcoholic beverages" that may come from distortions in the food chain are
expected to be dominated by disinflationary pressures that may come from the removal of the 100
percent tariff on products of Serbia and Bosnia & Herzegovina and the drastic fall in prices of
primary commodities (petroleum, base metals, etc.) in international markets. Starting from the
end of 2020 and the following year, inflation is expected to follow an upward trend in line
with the revival of the economy and the return of prices in foreign markets to their historical
levels, fluctuating around 1.3 percent in the medium term.
31
Graph 5 Real GDP and key contributors
11 The projections of other institutions have been taken from their recent updates and not all of them cover the same forecast
horizon. The parentheses in the tables represent the date of the last update for each institution.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
(16)
(14)
(12)
(10)
(8)
(6)
(4)
(2)
-
2
4
6
8
10
12
2017 2018 2019 2020 2021 2022 2023
y-o-y, %p.p
Private Consumption Public Consumption Private InvestmentPublic Investment Import of G&S Export of G&SReal GDP growth Rate
Information Box 2 . Comparison of macroeconomic forecast for MTEF 2021-2023 with
other institutions
The following tables present the projections of the real GDP growth rate (if available) among
the various institutions11 for the medium term. Such a comparison enables the judgment whether
the macroeconomic projections of the MoF are in line with those of other institutions (domestic
and international).
As Table 1 shows, all institutions for 2020 expect a decline in economic activity as a result of
measures taken to prevent COVID-19, to be followed by a rapid recovery in 2021. All
institutions emphasize that their base scenario is surrounded by a high degree of uncertainty and
a balance of risks significantly shifted downwards. The MoF projections are more pessimistic
than the average of the evaluations of other institutions, mainly as a result of the time of
preparation of these projections. The Ministry of Finance updated its macro-fiscal projections
during August, consequently having available data on the performance of most economic
indicators for the second quarter of 2020, when it is estimated that the pandemic has had the
greatest negative impact. While the projections of other institutions have been prepared earlier,
in conditions of even greater uncertainty and in the absence of key data for the second quarter.
Also, the MoF expects a lower inflation rate than other institutions.
In terms of nominal GDP, the projections of the Ministry of Finance are lower than those of the
International Monetary Fund for the four years (2020-2023), mainly as a result of the above
reason.
Table 1: Real GDP growth projections among institutions
Year 2019 2020 2021 2022 2023
32
2.2. FISCAL FRAMEWORK 2021-2023
2.2.1. GOVERNMENT REVENUES AND EXPENDITURE
2.2.1.1. Revenues and expenditure in 2020
In 2020, the economic situation and perspective in Kosovo has changed due to the COVID-19
pandemic. The impact on the economy of the pandemic and the measures taken by the government
have caused the fiscal forecasts for this year to change compared to the 2020 budget projections.
Estimates of total revenues by the Ministry of Finance for 2020 show that revenues will have an
annual decrease of about 5.3 percent, driven by a slowdown in economic activity. In addition to
the slowdown in economic activity, several other economic developments have been taken to reach
this figure, as follows: it is assumed that the tax debt stock will be further reduced by 20 million
and 15 million during 2020 and 2021, respectively; fiscal impacts related to the Free Trade
Agreement with Turkey, decisions on excise duty on cigarettes, liquids and cars, and the
Government's decision to reduce VAT from 18 percent to 8 percent for some categories (as part
of the Recovery Law) were taken into account. It should be noted that some of these developments
are related to 2021 as well, in addition to the current year 2020.
On the other hand, the budget expenditures for 2020 are expected to increase by about 25.2 percent
compared to last year. This is due to accommodation for expenditures derived from the Emergency
12 Central Bank projections are available in the publication ‘Quarterly Assessment of Macroeconomic Developments’ in June 2020
(https://bqk-kos.org/repository/docs/2018/BQK_TM1_2020_ZhM.pdf). 13EBRD projections are available in the report entitled ‘Regional Economic Prospects Covid-19: From Shock To Recovery’
published in May 2020 (https://www.ebrd.com/what-we-do/economic-research-and-data/rep.html).
MoF (August ’20) 4.0% -6.4% 5.4% 4.0% 4.0%
Central Bank of Kosovo (June ‘20)12 3.9% -5.9% n/a n/a n/a
World Bank (April ’20)13 4.2% -4.5% 5.2% n/a n/a
IMF (April ’20) 4.0% -5.0% 7.5% 3.7% 3.8%
EBRD (May ’20) 4.2% -5.0% 7.5% n/a n/a
Average of others 4.1% -5.1% 6.7% 3.7% 3.8%
Table 2. Nominal GDP projections (in EUR mil.) among institutions
Year 2019 2020 2021 2022 2023
MoF (August ’20) 7,114 6,713 7, 149 7,507 7,942
IMF (April ’20) 7,125 6,877 7,476 7,870 8,305
Table 3. Projections of inflation rate among institutions
Year 2019 2020 2021 2022 2023
MoF (August ’20) 1.7% 0.5% 1.5% 1.2% 1.2%
World Bank (April’ 20) 2.7% 1.6% 1.8% n/a n/a
IMF (April ’20) 2.7% 1.3% 1.6% 1.8% 1.8%
Average of others 2.7% 1.5% 1.7% 1.8% 1.8%
33
Fiscal Package and the Economic Recovery Program (with a total value of 365 million euros). As
a result, the structure of expenditures has undergone some changes (see Graph 6 for more details).
2.2.1.2. Revenue projections 2021-2023
Budget revenues for the medium term are expected to stabilize, based on macroeconomic
projections, reduction of the tax debt stock and fiscal policy effects. However, we should note the
general uncertainties arising from the situation created by COVID-19, which may affect the change
(revision) of revenues in the medium term.
Based on current projections, total budget revenues are expected to increase by an average of 5.8
percent over the medium term. The projected growth is most pronounced in 2021 mainly due to
the underlying effect from 2020 and the recovery of the economy after the pandemic.
Graph 6 Revenue structure in overall revenues
Revenues from indirect taxes continue to have the highest share of total revenues and are
expected to increase by about 5.8 percent in the medium term. VAT is expected to increase by an
average of 6.7 percent, driven by increased imports of goods and general consumption. It is also
worth mentioning that the export of travel services, which mainly represent the consumption of
immigrants during their stay in Kosovo, has a positive effect on the increase of revenues from local
VAT. As mentioned above, the Government's decision to reduce VAT on certain product
categories (as part of the Recovery Law) is foreseen during the VAT projection. Excise revenues
are expected to increase by an average of 2.9 percent in the medium term, while revenues from
customs duties are expected to increase by an average of 10.9 percent in the same period based on
the increased imports and reduced negative effect of the SAA.
On the other hand, direct tax revenues are expected to increase by an average of about 6.0 percent
in the medium term. The most significant increase is in 2021 as a result of the underlying effect
and a potential recovery of the economy after the contraction in 2020 caused by measures taken to
15% 16% 16% 16% 16%
75% 74% 75% 74% 74%
11% 11% 12% 12% 12%7%
-5%
7%
5%5%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
-20%
0%
20%
40%
60%
80%
100%
120%
2019 2020 R.B 2021 2022 2023
Direct Taxes Indirect Taxes Non-tax revenues Other Refunds Budget revenues y-o-y % right axis
34
combat the COVID-19 pandemic and by the slowdown in economic activity. In addition, this
increase is driven by the reduction of tax debt within corporate income tax and personal income
tax.
Non-tax revenues are projected to increase by 10.4 percent in the medium term and are expected
to increase as a share of GDP from 2.7 percent in 2020 to an average of 3.2 percent over the
medium term. The forecast reflects a more dynamic implementation of the process of legalizing
illegal construction and improving vehicle registration fulfilment. However, another important
factor in this increase is the postponement of the concession tax payments for 2020. More
precisely, the approval of the request of Prishtina International Airport "Adem Jashari" for the
postponement of the payment of quarterly instalments of the Annual Concession Fee until
beginning of 2021.
Information Box 3. Comparison of projections and actuals for year 2019
Table 1 in Annex 2 enables the comparison of the performance of the main budget items
according to their execution, in the budget and MTEF (the initial and the last one) for 2019.
In terms of expenditures, the main conclusion is that current expenditures in MTEF (2019-2021)
have been underestimated due to the increase in the number of beneficiaries in pension schemes,
as a result of non-reform of the scheme for war veterans which would have enabled the reduction
of the number of beneficiaries in this category and due to the decision to increase the basic and
contributory pensions by 20percentand 15percentduring 2019.
While current figures for current expenditures compared to the 2019 budget were lower due to
an under-spending on wages and salaries and on goods and services, despite that the category of
subsidies and transfers had an over-spending. This under-spending in the category of "salaries
and wages" and "goods and services" was mainly due to non-fulfillment of the number of
vacancies, late approval of the budget (February 2019), early elections (October 2019) and a
contingency planned in the ‘goods and services’ category, which at the end of 2019 was partly
reallocated to cover expenditures in the ‘subsidies and transfers’ category.
Capital expenditures are below their projections in both the MTEF and the Annual Budget for
two main reasons :
1) non-execution of the investment clause due to difficulties in the efficient functioning of
the implementing units and project delays ;
2) non-execution of capital projects financed from the regular budget due to difficulties in
decision-making since 2019 was an election year and the budget was approved late in February
2020.
In 2019 there was a difference between actual revenues and projections of revenues both in the
last MTEF (2019-2021) and in the annual budget. The lowest revenue performance in 2019 was
largely determined by VAT and excise revenues. This was partly influenced by the Law on the
35
2.2.1.3.Expenditure projections 2021-2023
Budgetary expenditures in the medium term are expected to stabilize after the COVID-19
pandemic and gradually return to levels of historical growth. The year 2021 is expected to be
characterized by a decline in some of the expenditure categories, mainly due to the underlying
effect of 2020, where there has been a pronounced increase in some categories due to government's
fiscal stimulus measures. Also, expenditures are planned in accordance with the Public Finance
Management Law and compensate the excessive deficit on fiscal rule in 2020.
Along the medium - term 2021-2023, expenditures are projected to hold a share of about 32.2
percent of GDP on average. Of them, current expenditure is expected to be around 22.7 percent of
GDP, while capital expenditure around 8.8 percent. Part of capital expenditure is planned to be
financed by foreign borrowing through the investment clause, which allows the Government to
finance projects of public interest and influence the country's reduction of development
(infrastructure) barriers.
Although during this period, there have been difficulties to accommodate expenditure as a result
of legal restrictions to offset the excessive deficit in 2020 due to measures taken for preventing the
pandemic, public expenditure in the medium term is expected to remain almost unchanged. A
decline in expenditures is foreseen in 2021 and 2022, to continue with an increase in 2023. This
decline in 2021, especially in current expenditure, is largely due to the 2020 underlying effect,
where current expenditure has increased to accommodate fiscal stimulus measures. Graph 7 shows
the structure of general government expenditures over the medium term which is planned as
follows:
Graph 7 Structure of budget expenditures
Prohibition of Gambling and the slower performance of import of goods. On the other hand, the
projections had overestimated the negative effect of the Stabilization and Association
Agreement on customs duties. Meanwhile, revenues from CIT and PIT and non-tax revenues
had a slight over-performance.
36
Current expenditures in the medium term are planned to have a decrease of 2.7 percent which
comes mainly from a decrease in 2021 (-5.5%) and 2022 (-4.7%). The category of expenditures
for wages and salaries is planned to increase by an average of about 1.3 percent over the medium
term.
The category of goods and services is expected to increase on average by 3.2 percent in the
medium term mainly due to significant increase in 2021 (6.2%), as a result of a low base in 2020
and additional expenditure on municipal elections (approx. 5 million euros) and the population
census (about 7 million euros) in 2021. However, despite these changes, expenditures on goods
and services are expected to be on average 4.6 percent of GDP.
Subsidies and transfers are expected to decline by 1.1 percent mainly as a result of high spending
in 2020 to accommodate transfers and subsidies within government measures during the pandemic.
Expenditures in this category are expected to be 8.7 percent of the GDP during the medium term.
Capital expenditures - account for a considerable amount of total expenditure and are expected
to be around 27.8 percent of total expenditure during the medium term. During this period is
expected the implementation of capital projects based on a list of priorities which entails projects
with influence on upgrading the transportation network, upgrading the electricity network, and
upgrading education, social system, and healthcare. This category of expenditure is expected to
decline at a rate of 1.1 percent during the medium term. This decline is attributed to the high capital
expenditures budgeted for 2020, and then to the decline in the following year due to the underlying
effect. Most capital investments over the next medium term are expected to come from regular
budget financing, but a large number of projects in various sectors are planned to be financed by
external lending through the investment clause (Box 1 in the annex).
74% 71% 72% 70% 69%
25% 28% 26% 28% 29%
1% 1% 2% 2% 2%
7%
25%
-6% -5%
2%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
0%
20%
40%
60%
80%
100%
120%
2019 2020 R.B 2021 2022 2023
Recurrent Expenditure Capital Expenditure
Interest Payments Budget Expenditure y-o-y % right axis
37
2.2.2. Budget deficit and the fiscal rule
According to the Government Decision14 No. 03/02, dated 05.06.2020, the request for temporary
exceeding of the budget deficit limit up to 6.5 percent of GDP and reduction of the usable bank
balance limit up to 3 percent of GDP was approved, due to deterioration of macrofiscal parameters
as a result of the COVID-19 global pandemic situation. Consequently, in 2020, as a result of the
decline in budget revenues due to the economic downturn and as a result of the increase in budget
expenditures due to the (not yet complete) implementation of the Emergency Fiscal Package and
a series of other measures under Economic Recovery Program, approved by the Government in
March 2020, fiscal deficit, according to the fiscal rule, in 2020 is expected to reach the level of -
6.5 percent of GDP, while the usable bank balance will be about 3.1 percent of GDP.
In the following years (2021, 2022 and 2023), the budget deficit is expected to gradually decrease
to -4.8 percent, -2.1 percent and -1.5 percent, respectively. Whereas, the usable bank balance is
expected to be 3.1 percent of GDP in 2021, 3.0 percent of GDP in 2022 and 3.2 percent of GDP
in 2023. Within six (6) months from the lifting of pandemic response measures, the Ministry of
Finance will draft a medium-term plan in order to adjust the limits of temporary exceedances
authorized and bring them in line with Article 22A of the Law on Public Financial Management
and Accountability. Our preliminary estimates suggest a gradual return to the baseline deficit limit
over the medium term. This for two reasons; 1) to fully reflect the impact of measures related to
COVID-19 in the coming years, and 2) a gradual return will avoid the negative effects that a rapid
return from 6.5 percent to 2 percent would have on the country's economy. As part of the Ministry
of Finance's approach to full transparency and accountability, regular six (6) monthly reports will
be prepared to monitor the implementation of the fiscal rule/deficit, including exceptions approved
by the Assembly.
14 https://kryeministri-ks.net/wp-content/uploads/2020/06/Vendimet-e-Mbledhjes-s%C3%AB-2-t%C3%AB-
t%C3%AB-Qeveris%C3%AB-s%C3%AB-Republik%C3%ABs-s%C3%AB-Kosov%C3%ABs-2020.pdf
Information Box 4. Main deviations between MTEFs 2021-2023 and 2020-2022 for 2021
and 2022
Tables 2 and 3 in Annex 2 identify and explain the differences in revenues and expenditures
between MTEF 2020-2022 and MTEF 2021-2023. Table 2 presents the deviations in the
forecasts for 2021, while Table 3 presents the deviations for 2022.
In terms of budget revenues, we have similar deviations in both years and this mainly stems
from indirect tax revenues such as excise, VAT and customs duties. These deviations come
mainly from the underlying effect or the effect carried over from 2020. In 2020, as a result of
the pandemic and the preventive measures of the government, there was a significant decline in
the economic activity and consequently a decreae in revenues, especially indirect ones.
Therefore, the significant differences in revenues compared to the previous MTEF come from
the lower levels of revenues, despite their increase compared to 2020. Budget expenditures are
also lower in both 2021 and 2022 than those planned in the previous MTEF. These deviations
38
2.2.2.1.The level of State debt, developments and perspectives for the upcoming years
The total general debt by the end of 2020 was 1,330.44 million Euros, of which 909.51 million
Euros represents domestic debt, while 420.93 million Euros represents international debt, as
presented in the table below. The General Debt portfolio by the end of 2019 consisted of Domestic
Debt and International Debt, and there was no Municipal Debt or Municipal Guarantee issued. It
also included three state guarantees, amounting to 41.65 million15 Euros.
Table 2 General Debt
2015 2016 2017 2018 2019 July 2020
International Debt 371.17 373.77 422.15 416.43 409.10 420.93
Domestic Debt 377.78 478.97 574.27 676.62 791.94 909.51
Total Public Debt 748.95 852.74 996.42 1,093.05 1,201.05 1,330.44
State Guarantee 10.00 20.00 44.00 43.70 42.68 41.65
Total Public Debt as percentof
GDP 13.07 14.38 16.62 16.90 17.46 18.38
GDP 5,807.01 6,070.11 6,413.86 6,725.91 7,123.10 7,464.0016
Domestic debt exceeded international debt for the first time in 2015, and since then has
continued with such an upward trend in favor of domestic debt. This part of Kosovo's debt
portfolio consists of debt instruments with a maturity of 1 year to 10 years. The Ministry of
Finance since the beginning of the issuance of securities (year 2012) has focused on budget
financing mainly from the internal market, contributing to market development. Through
securities, the Government of Kosovo has borrowed funds on favorable terms and has
contributed to the development of the Securities market. At the end of 2019, the domestic debt
amounted to 791.94 million euros, or 66percentof total debt. By July 2020, domestic debt has
reached the level of 909.51 million, while by the end of 2020, domestic debt is projected to reach
962.09 million euros or 14.33percentof GDP.
The rest of Kosovo's public debt is international debt which at the end of 2019 consisted of the
program17 with the International Monetary Fund (IMF), loans from the World Bank (WB),
15 The Guaranteed Loan for Urban Traffic has started to be paid, and consequently the State Guarantee is reduced by
the amount paid.
16 GDP as in the Budget Law 2020, July 2020 17 Stand By Arrangement
occurred for several reasons. First, the deficit excess in 2020 requires that this excess be offfset
in subsequent periods. Second, the economic activity projected in these two years is slower than
that foreseen in the previous MTEF and it has affected the wages ans salaries to have a slower
increase. Third, there was a revision of projects in the investment clause based on the probability
of their execution. Finally, the Economic Recovery Program has been included which has
resulted in some additional expenditures.
39
German Bank for Reconstruction and Development (KfW), European Bank for Reconstruction
and Development (EBRD), the European Investment Bank (EIB) and other low-participation
creditors. Excluding the program with the IMF and inherited debt, all other borrowings are
related to the financing of specific projects in various sectors. At the end of 2019, the
international debt amounted to 409.10 million euros, or 34percentof total debt. By July 2020 the
international debt stock was 420.93 while by the end of 2020, the international debt stock is
projected to reach 719.98 million euros or 10.73percentof GDP. The following is the current
state of the international debt portfolio, including committed and non-disbursed debt (meaning
agreements that have been ratified by the Assembly of Kosovo but have not yet begun to be
disbursed).
Table 3 International Debt including undisbursed debt as of sipas 31.07.2020
Creditor
Actual
Debt
Ratified
(A)
Actual
Debt
Disbursed
(B)
Undisbursed
debt
(C=A-B)
Outstanding
Debt
(D=B-E)
Debt
Repayment
(E)
Undisbursed
debt as
percentof
GDP
Disbursed
Debt
(unpaid)
as
percentof
GDP
IBRD 381.21 381.21 0.00 129.97 251.24 0.00% 1.74%
IDA 157.72
67.10 90.62 65.48 1.62 1.21% 0.88%
IMF 339.26 339.26 0.00 140.28 192.65 0.00% 1.88%
KFW 71.00 68.43 2.57 39.65 28.78 0.03% 0.53%
UniCredit 24.98 20.23 4.75 19.97 0.26 0.06% 0.27%
OFID, IsDB, SFD 45.87 13.54 32.33 10.39 3.15 0.43% 0.14%
EBRD 139.90 6.76 133.14 6.37 0.40 1.78% 0.09%
EIB 122.00 7.00 115.00 7.00 0.00 1.54% 0.09%
NATIXIS Franca 66.00 0.00 66.00 0.00 0.00 0.88% 0.00%
RBI Austria 5.13 1.83 3.30 1.83 0.00 0.04% 0.02%
Borxhi Ndërkombëtar 1,353.06 905.35 447.71 420.93 478.08 6.00% 5.64%
Remarks: The actual ratified debt means the total amount of all international financial agreements on borrowings (excluding
repayable loans), which are ratified by the Assembly of the Republic of Kosovo. The International Debt at column "D” in the table
changes also as a result of the foreign exchange rate on borrowing in non-euro currency.
Historically, the level of General Debt of the Government of Kosovo has been relatively low.
However, as the graph below shows, Kosovo's debt has marked a gradual upward trend. From the
following data, it can be noticed that there will be an increase in 2020. This will happen mainly
due to the need to finance the deficit to meet the immediate health and economic needs caused by
the pandemic COVID-2019: ( a) from additional borrowings from the domestic market through
Securities, (b) obtaining loans from incentive packages offered by international financial
institutions, and (c) a portion of the disbursement of funds through the investment clause.
40
The new situation created by the COVID-19 pandemic has presented the need for additional funds
to cope with the health and economic situation. As a result, the MFT, for immediate needs, has
planned to increase the issuance of securities in the amount of 50 million euros, by not preferring
the public auction method. In this regard, the possibility is being considered that these funds be
issued with private placement to the Pension Funds, in accordance with the law on public debt.
This would be a long-term instrument (at least 10 years maturity) that would coincide with the
strategy for extending the average return time and the Fund's strategy for prolonging the maturity
of their portfolio of liabilities and investments - assets. Also, through this investment of the Fund,
Kosovo's contributors will directly benefit.
In response to the emergency needs created by the pandemic, the Government is also considering
the benefit of emergency packages and special instruments of IFIs where Kosovo is a member.
The IMF has approved and disbursed the Instrument for Immediate Funding18 in the amount of
about 52 million Euros, to alleviate the urgent needs arising from the crisis. Kosovo is expected to
receive an amount of 50 million Euros from the World Bank (WB), as well as about 100 million
Euros19 in the form of loans with favorable conditions from the European Union (EU)
to deal with the effects of the crisis, a € 35 million loan from the Council of the European
Development Bank (CEB) and a € 30 million loan from the European Bank for Reconstruction
and Development (EBRD). Some other financing options are being analyzed, but it should be
borne in mind that according to the legislation in force it can be borrowed only to the extent
provided in the budget law (table 1) and such a borrowing must be ratified through an international
financial agreement with 2/3 of the votes.
As of July 2020, the total debt stock was 1,330.44 million euros, which represents
18.38percentof GDP, while by the end of 2020 it is projected to be 1,682.07 million euros or
25.68percentof GDP. The projected stock for the General Debt includes data from the Revised
Budget Law for 2020. The figure below shows the trend for the Total Debt stock.
18 https://www.imf.org/en/News/Articles/2020/04/10/pr20149-kosovo-imf-executive-board-approves-us-million-
emergencysupport-address-covid-19-pandemic 19 From which, 50 mln Euros will be disbursed in year 2020 and other 50 mln Euros in year 2021
41
Grafiku 8 Trend of General Debt and as percentof GDP
Due to favorable conditions on borrowing, in the medium term, the Government intends to be
slightly oriented towards international borrowing. In this regard, cooperation and communication
with international financial institutions, in particular with developmental ones, will be enhanced
in order to introduce the priority projects for the economy of the country and consequently, to
finance these projects through preferential loans from these institutions.
Moreover, the Ministry of Finance aims to further develop the domestic market of securities of the
Government of Kosovo by stimulating and supporting the expansion of the investor’s base. The
expansion of the investor’s base is planned to be done by issuing new debt instruments, which in
some cases will target new market groups with high investment potential. Also, the strengthening
of the secondary market, the increase of liquidity of securities through REPO transactions between
banks, but also with the beginning of the implementation of these transactions with CBK are
expected to increase the dynamism of this sector.
The financing the Kosovo budget deficit will always be in full consistency with the level of deficit
presented in the Budget Law as well as the need to finance the banking balance. In any case, the
Ministry of Finance will ensure that the amount borrowed for Government needs will be at the
lowest possible cost and always within the acceptable limits of exposure to market risks. In order
to ensure proper and strategic debt management, the Ministry of Finance prepares each year the
Mid-Term State Debt Program, which is complementary document and in line with the Mid-Term
Expenditure Framework. Regarding the public debt for the period covered by the MTEF,
borrowings for financing specific projects (those signed, but not debited and those that are
expected to be signed) have been taken into consideration. Moreover, the scenario of economic
and fiscal projections also takes into account the issuance of securities towards financing the
deficit. Taking into account the returns for the medium term, a gradual increase in public debt
stock is expected, but the total debt to GDP ratio will remain at acceptable and sustainable levels.
8.94%10.65%
13.07%14.38%
16.22% 16.91% 17.46%
25.68%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
2013 2014 2015 2016 2017 2018 2019 2020 Pr
Total Debt Debt as a % of GDP
42
The new situation created by COVID-19, presents the need to review some of the main
macroeconomic indicators, therefore this requires a review of the structure and sources of funding,
to adapt in a timely manner to the consequences of pandemics. However, the limit of public debt
remains within the legal parameters, with any scenario that will be decided to finance the deficit
(due to declining budget revenues) as well as with any increasing budgetary pressures on spending.
2.3. MEDIUM-TERM RISKS 2021-2023
The basic framework presented in the MTEF, as every year, is accompanied by risks which may
adversely alter the macro-fiscal situation, depending on the probability of materialization and the
intensity with which those risks are executed. In order to support cautious planning and in the
interest of transparency, part of the Macro-Fiscal Framework will take into consideration these
fiscal risks, the details of which will be outlined below. Compared to last year, the risks have
significantly increased, mainly originating from macroeconomic developments in the country.
Systematic (macroeconomic) risks
This subsection presents the effects that deviations from the macroeconomic projections used for
the MTEF may have on key budget aggregates. Table 4 describes how the positive and negative
deviations from the macroeconomic projections used for MTEF 2021-2023 affect revenues,
expenditures and budget balance.
This sensitivity analysis shows that the developments of macroeconomic variables mainly
determine the performance of budget revenues rather than the expenditures, as in Kosovo few
categories of expenditures are directly related to macroeconomic developments. An example for
this impact is inflation, which some social transfers of the budget are linked to.
Law no. 04/L-131 "Law on Pension Schemes Financed by the State", Article 5, stipulates that if
any pension paid under this Law is increased by any other legal or sub-legal act, or by any other
authorized administrative measure, indexation with inflation or with the cost of living shall be
applied for two calendar years, starting from the month the increase has entered into force. Since
in 2019 there has been an increase in basic pensions and contributory pensions by a government
decision, there is no inflation-induced expenditure to be expected in 2021. However, there are
other areas of expenditure in the budget which were not affected by this government decision,
therefore the effect of inflation applies to them over the 2021-2023 period.
As mentioned several times throughout this paper, the macroeconomic projections on which the
Medium Term Expenditure Framework 2021-2023 is built carry high uncertainties and depend on
the duration of the period of social distancing or other restraint measures, as well as on pandemic
developments in the country, but also in other economies. The combination of these uncertainties
surrounding the baseline scenario would generate real economic growth, i.e. on average 3.5
percentage points lower than the projected growth rate in the baseline scenario for the 2021-2023
period.
43
Graph 9 Real economic growth, y-o-y, %
Given that Kosovo is an open economy, characterized by a high share of imports in GDP (about
45%), price developments in international primary commodities play an important role in the
domestic economy. In the baseline scenario presented in MTEF 2021-2023, a drastic decline in
prices in international markets during 2020 is assumed as a result of the pandemic to be followed
by an improvement trend in 2021 and onwards. Similar to the first scenario, under the assumption
that the current situation might last beyond 2020, then the likelihood that the fall in prices in
international markets will be even greater. A deviation by 10 percent in the “all primary
commodities” index20 has negative effects on budget revenues due to its impact on imports and a
smaller impact on expenditures due to inflationary pressure stemming from higher prices of
commodities.
Remittances represent an important source of foreign financing in Kosovo, accounting for about
12 percent of GDP over the past years. These inflows have significantly mitigated the trade deficit
and are mainly used for consumption, thereby mitigating the negative effects of poverty and high
unemployment in Kosovo. In the baseline scenario, remittances are expected to decline in the
second half of 2020 (with the main negative effect appearing in the second quarter and onwards)
and 2021, as a result of developments in the Eurozone. However, if the economic outlook in the
countries where Kosovar emigrants are located worsens, then the decline in remittances will be
even greater than expected. A decrease in these inflows is transmitted into lower/higher disposable
income and therefore into lower/higher consumption which is then reflected into lower/higher
GDP and budget revenues.
20 A deviation of 10percentis the approximate standard deviation of the annual growth rates of the "all primary commodities" index, which includes fuel and other commodities.
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
2019 2020 2021 2022 2023
Baseline Scenario Risk Scenario
44
Table 4 Sensitivity analysis of the budget to fluctuations of macroeconomic variables for the three-year
period 2021-2023
Variable Change
Revenues Expendi
tures
Budget
Balance
impact in
million euros
percentof
projected
revenues
impact in million
euros
Nominal GDP 3.5 percentage points (-)
-210.8 2.90% -210.8
Remittances 10 percent
deviation (-) -80.06 1.3% -7.06
“All primary
commodities” index
10 percent
deviation (+) -16.68 0.27% 0.39 -17.07
Specific risks
1. Risk of contingent liabilities arising from on-borrowed loans and credit guarantees
The potential source of this risk in the public debt portfolio is posed by public sector guaranteed
loans and international on-borrowed loans by the Ministry of Finance and Transfers to companies
that provide essential public services. Guaranteed loans at the end of 2019 amount to 42.68 million
euros and account for less than 1 percent of total debt. Part of the portfolio that may require closer
monitoring is the state guarantee for 'Trafiku Urban' and on-borrowed loans to companies that
offer public goods. Analyzes of financial and economic risks have raised concerns about the poor
performance of public companies. A deeper deviation of the financial results of these companies
may cause a burden on the Government in the medium term, both in subsidizing the services they
provide and in assuming financial obligations to external creditors.
In order to limit the impact of risk of contingent liabilities, a number of measures will continue to
be implemented such as: (a) monitoring the financial position of beneficiaries (b) initial assessment
of the possibility of materialization of existing contingent liabilities. Depending on the estimates
for the alleged losses, the applicable guarantee fees in accordance with the Law on Public Debt
will be determined. The inclusion of guarantees in the amount of total debt in calculating the debt
limit to GDP also serves as a measure to manage these risks.
2. Under-execution of capital expenditures
An increase in public capital spending to address structural barriers is a pillar of the Government's
strategy to support a friendly economic environment for economic growth. In recent years, despite
improvements, under-execution of capital expenditures exceeded 5 percent of total budgeted
amounts. For prudent planning purposes, the 2021-2023 framework provides for a historical level
of under-execution for capital projects financed by the regular budget, while for loan-financed
projects, the assumptions are even more conservative.
45
Nonetheless, under-execution of capital projects over the level assumed in the baseline scenario,
especially for projects financed by loans, is considered as a potential risk to lower growth forecasts.
This happens because the execution of capital projects financed by concessionary debt, after the
signing of financial agreements, remains a challenge for budget organizations. This is mainly due
to a hasty decision-making on loans, without making sure that all the preconditions are met and
the necessary preparations, studies and detailed analyses (including market analyses) are done, in
order to ensure the immediate initiation of project implementation after the ratification of loans as
well as the efficient use of funds from loans. Another very important factor that can further
deteriorate the performance of capital expenditures is the situation created by the COVID-19
pandemic, during which the economic and administrative activities of the parties involved in these
projects have been reduced to a minimum, adding to the difficulties in execution of capital
expenditures or their postponement to a later time. Other factors include the lack of proper
alignment of procurement procedures with those of the creditor at the beginning of the process,
the unsatisfactory participation of officials of Line Ministries during the loan negotiation process,
the lack of consolidation and instability of Project Implementation Units and the lack of capacities
for projects.
3. Pressure to increase spending on transfers
As presented in MTEF 2021-2023, the fiscal space exceeds the legal deficit limit of 2 percent
according to the government's decision to create space to accommodate policies in the context of
fighting the COVID-19 pandemic. According to these projections and under the restriction that
exceeding the deficit above the level allowed in 2020 should be offset in the coming years, it is
clear that the fiscal space to accommodate new initiatives for social transfer is quite limited. The
increased pressure on the use of public money as redistribution, especially when such
redistribution does not target poverty but is based on other criteria, poses a fiscal risk to a fiscal
strategy targeting socio-economic development. However, if the pandemic situation continues
longer and the impact on the economy turns out to be significantly worse than that presented in
this version of the MTEF, then a reorganization of expenditures or finding resources of funding
will be inevitably necessary, in order to accommodate new fiscal initiatives to address the socio-
economic consequences of the pandemic.
4. Fiscal Risk from revenue collection
As mentioned in the macroeconomic risks, the new situation created by the COVID-19 pandemic
aggravates the process of collecting budget revenues. If prior to the pandemic, the informal
economy was one of the main risks for revenue collection, after the pandemic an additional risk
will be the inability of businesses or households to pay their debts due to the deterioration of their
financial situation.
One important fiscal risk linked to tax revenues is whether tax receivables can be collected or not.
According to the annual financial report for the year 2019, the uncollected receivables amounted
to about 634 million euros, of which 452 relate to the central government level and 182 to the local
government level. These 634 million euros of uncollected receivables represent a slight increase
46
from the previous year (by 23 million euros). The average annual increase over the period 2016-
2019 amounts to 7.2 percent, with the lowest increase registered in 2019 (3.8 percent).
5. Outstanding liabilities
Article 39 of the PFM Law defines outstanding liabilities as payments overdue 30 days. Compared
to the previous year, the annual financial report of the Budget of the Republic of Kosovo for 2019
includes an annex on outstanding liabilities which include financial commitments, accounts
payable and outstanding liabilities, while disaggregating the amounts in two different categories,
based on due date: i) less than 30 days; and ii) more than 30 days.
Table 5 presents outstanding liabilities (> 30 days) for three years at central and local level. In
2019, there is a slight decline in total outstanding liabilities, from 88.3 million Euros in 2018 to 79
million Euros in 2019, mainly as a result of the decline in outstanding liabilities at local level. At
the central level, most of the outstanding liabilities (> 30 days) are mostly attributed to the Ministry
of Environment and Spatial Planning (which has marked a significant increase from 2018 to 2019)
and the Ministry of Infrastructure (its liabilities which have been halved from 2018 to 2019). At
the local level, in 2019 Prizren and Gjilan are the two municipalities, which constitute most of the
outstanding liabilities (> 30 days). The decrease in liabilities at the local level in 2019 is mainly
attributed to the decrease in outstanding liabilities in the municipalities of Prishtina and Gjilan. In
2019, total outstanding liabilities accounted for 4.07 percent of current expenditures of budgetary
organizations at the central level and about 3.06 percent at the local level, which together account
for 3.82 percent of total budget expenditures.
Table 5 Outstanding liabilities
2017 2018 2019 2019/ Total
Spending of BO
Central Government (mil Eur) 33.83 62.99 63.32 4.07%
Ministry of Infrastructure 22.6 38.5 15.4 7.83%
Ministry of Environment and Spatial Planning 0.6 2.5 31.8 73.22%
Health Insurance Fund 4.0 6.0 9.8 104.40%
Ministry of Culture, Youth and Sport 2.3 3.1 2.5 8.07%
Local Government (mil Eur) 18.8 25.3 15.7 3.06%
Prishtina 1.3 7.5 0.1 0.18%
Prizren 3.3 2.2 1.3 3.08%
Gjilan 2.5 7.8 9.8 38.90%
Total (mil euro): Central + Local 52.7 88.3 79.0 3.82%
Tot. payments/tot. budget exp % 3.0% 4.50% 3.82%
6. Fiscal risks from litigation costs
One important indicator of fiscal risks from litigation is the performance of the annual government
payments due to court decisions. Table 6 shows the payments by court decisions over the last three
years, both at central and local government level. Overall, payments by court decisions account
for no more than 2 percent of total budget expenditures, though showing an increasing trend over
47
the years, both at central and local government. Most of the litigation costs over the last three years
53 stem from the local government level. Payments by court decisions at the central government
are mainly attributed to Ministry of Finance (on behalf of expropriation for MESP21), Ministry of
Public Administration, Hospital and University Clinical Service of Kosovo, and Property
Comparison and Verification Agency. At local level, municipalities Ferizaj, Leposaviq, Mitrovica
and Prishtina account for the majority of these payments. In 2019, payments based on court
decisions account for 0.67 percent of actual expenditures of budget organizations at central
government level and about 2.99 percent at the local government level, which add up to 1.25
percent for total budget expenditures. In order to have a fuller picture of the fiscal risks generated
by litigation costs, the magnitude of costs that could emanate from pending court cases would be
required.22
Table 6 Payments based on court decisions (mln Eur)
2016 2017 2018 2019
2019/ Total
Spending of
BO
Central government (mil Eur) 4.11 5.26 7.59 10.5 0.67%
Ministry of Finance 4.5% 1.9% 0.5% 27.5% 9.33%
Ministry of Public Administration 0.9% 1.2% 0.1% 12.2% 4.33%
Hospital and University Clinical Service of Kosovo 1.3% 5.0% 4.0% 11.6% 0.98%
Ministry of Environment and Spatial Planning 51.8% 46.5% 31.3% 5.6% 1.34%
Property Comparison and Verification Agency 0.6% - 7.9% 5.7% 22.32%
Local Government (mil Eur) 2.2 6.3 12.7 15.3 2.99%
Municipality of Ferizaj 7.2% 17.3% 22.9% 29.7% 14.31%
Municipality of Leposaviq 0.0% 3.2% 17.6% 8.7% 31.10%
Municipality of Mitrovica 6.7% 8.6% 8.3% 9.7% 7.66%
Municipality of Prishtina 18.3% 14.1% 5.2% 8.0% 1.56%
Total (mil euro): Central + Local 6.34 11.54 20.26 25.83 1.25%
Tot. payments/tot. budget expenditures, % 0.38% 0.66% 1.04% 1.25%
21 Ministry of Environment and Spatial Planning 22 The next MTEF will include more detailed information on the main payments by court decisions and will attempt
to quantify the magnitude of costs which might arise from pending court cases.
48
THIRD PART
3. SECTORIAL EXPENDITURES FRAMEWORK 2021-2023 – CENTRAL
GOVERNMENT
As can be seen, in the first part of this document are presented the government priorities related to
MTEF 2021-2023, where it is emphasized that the priorities derive from the National Strategy for
Development, the Government Program, the Program for Economic Reform 2020-2022, the National
Program for the Implementation of the SAA, as well as other strategic sectoral documents. Whereas,
following the document, the main objectives will be presented according to the central level sectors
where a total of 10 sectors are presented where each sector has presented the financing trend 2019-
2020 and budget estimates for the next three-year period 2021-2023. Within each sector, budget
organizations are presented according to the respective sectors. The following tables present the
projections for the years 2021-2023 for the general budget of Kosovo, at the central level and by
sectors. In the fourth part of the document is presented the municipal funding. Regarding the
projections of budget expenditures for the next medium term period 2021-2023, there are two key
elements that budget organizations should keep in mind. First, budgetary organizations can plan
spending within the given limits only after they have covered the contractual obligations, and then
they can use the free space within the ceilings for other priorities. Second, the budgetary ceilings
assessed by this document may change through the third budget circular, as a result of the change in
macroeconomic circumstances in terms of exiting from the pandemic COVID 19.
Kosovo
General
Budget
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 2,068,083,728 2,620,368,614 2,475,084,683 2,359,770,099 2,411,016,698
Number of
employees
84,323 85,383 85,501 85,501 85,501
Wages and
allowances
610,090,935
634,531,459 638,752,281 641,324,257 644,530,876
Goods and
services
271,425,463 303,396,688 321,863,850 315,739,791 315,690,328
Utilities 26,186,131 25,005,711 30,210,654 30,558,405 31,058,405
Subsidies and
transfers
628,339,158 863,135,013 782,505,153 651,700,231 655,620,231
Capital
expenditures
532,042,041 729,891,772 645,616,744 665,747,416 699,916,858
Reserves 0 34,407,971 7,800,000 7,800,000 7,800,000
Interest 30,000,000 48,336,000 46,900,000 56,400,000
Sources of
financing
Government
grants
1,873,802,777 2,121,018,281 2,100,883,957 2,018,561,486 2,072,696,192
Own source
revenues
60,748,156 92,428,712 93,049,865 99,964,138 102,822,246
49
Revenues from
PAK
105,150,580 185,000,000 30,000,000 - -
Dedicated revenues
6,458,847 5,699,867 4,274,917 4,289,502 4,303,838
Financing from
borrowing
28,382,216 191,921,621 202,814,860 194,344,475 179,098,260
Financing from
budget deficit
(2%) – 04
20,895,548 44,676,383 24,383,812 18,750,060 8,456,274
Financing from
Investment
clause - 06
7,486,668 147,245,238 178,431,049 175,594,415 170,641,986
Donor grants * 1,066,557 265,910 - - -
Central level -
Total
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 1,554,780,447 2,008,773,995 1,879,947,403 1,705,669,958 1,730,608,483
Number of
employees
40,120 41,034 41,139 41,139 41,139
Wages and
allowances
346,664,620 356,828,112 360,363,857 362,165,676 363,976,502
Goods and
services
207,035,898 224,773,313 241,887,016 232,197,045 233,690,328
Utilities 15,507,751 13,473,954 18,396,405 18,558,405 18,558,405
Subsidies and transfers
606,370,949 843,867,556 766,562,568 634,700,231 637,620,231
Capital
expenditures
379,201,229 565,036,469 484,937,556 450,248,602 468,963,017
Reserves - 4,794,591 7,800,000 7,800,000 7,800,000
Sources of
financing
Government
grants
1,416,884,304 1,628,370,374 1,640,327,267 1,497,123,848 1,537,294,252
Own source
revenues
6,354,433 9,312,133 9,912,133 9,912,133 9,912,133
Revenues from
PAK
105,150,580 185,000,000 30,000,000 - -
Dedicated
revenues
6,458,847 5,699,867 4,274,917 4,289,502 4,303,838
Financing from borrowing
19,932,284 180,391,621 195,433,085 194,344,475 179,098,260
Financing from
budget deficit
(2%) – 04
19,860,584 44,676,383 24,383,812 18,750,060 8,456,274
Financing from
Investment clause
- 06
71,700 135,715,238 171,049,274 175,594,415 170,641,986
Donor grants * 1,066,557 265,910 - - -
50
3.1. GENERAL PUBLIC GOVERNANCE
The main goals within this sector are good governance, professional public administration, socio-
economic development and advancement of the country's integration processes. The main objectives
during the next three-year period 2021-2023 within this sector are:
• Ensuring new recognitions, strengthening the international subjectivity of the Republic of Kosovo
and applying the criteria in the EU integration process and international institutions;
• Maintaining macro-fiscal sustainability, developing and perfecting the system of collection and
administering tax and customs revenues, and reducing the informal economy;
• Increasing quality level of public services;
• Standardization and simplification of administrative procedures and deepening the fight against
corruption;
• Advancing the electronic procurement system and improving the quality of public finance
management;
• Balanced development and increase of inter-municipal and cross-border cooperation;
• Food safety and public health.
The budgetary organizations that make up the Sector of the General Public Government are: the
Assembly of the Republic of Kosovo, the Office of the President, the Office of the Prime Minister,
the Ministry of Finance , Ministry of Local Government Administration, Ministry of Regional
Development, Ministry of Foreign Affairs and Diaspora, Ministry of European Integration, Public
Procurement Regulatory Commission, Anti-Corruption Agency, Procurement Review Body,
Election Complaints and Appeals Panel, Agency for Information and Privacy, National Audit Office,
Central Election Commission, Independent Oversight Board for the Kosovo Civil Service. This sector
also includes Unforeseen Expenditures.
General Government
Sector
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 115,955,611
3,806 469,094,471
3,950 362,320,578
3,950 156,102,717
3,950 162,128,548
3,950
Number of employees 43,631,418 44,500,044 46,278,416 46,509,810 46,742,358
Wages and allowances 45,542,918 40,347,118 68,045,364 48,271,109 47,714,392
Goods and services 1,190,235 1,262,136 2,111,346 2,111,346 2,111,346
Utilities 12,183,797 214,222,190 165,730,000 26,230,000 24,150,000
Subsidies and transfers 13,407,243 163,968,392 75,355,452 27,180,452 36,610,452
Capital expenditures - 4,794,591 4,800,000 5,800,000 4,800,000
Reserves
Sources of financing 112,031,788 323,918,419 311,139,892 150,922,031 148,947,862
Government grants 286,656 180,686 180,686 180,686 180,686
51
Own source revenues 3,637,167 102,000,000 30,000,000 - -
Revenues from PAK - - - - -
Financing from borrowing - 42,995,366 21,000,000 5,000,000 13,000,000
Financing from budget deficit (2%) – 04
- 4,695,366 - - -
Financing from Investment clause - 06
- 38,300,000 21,000,000 5,000,000 13,000,000
Donor grants * 490,506 265,910 - - -
* Donor grants are not part of total expenditures according to sources of financing
3.2. DEFENCE
The mission of the Defence Sector is to draft and implement general state defence policies at the
strategic level, as well as to exercise its functions and competencies in accordance with the Security
Strategy of the Republic of Kosovo and the Defence Strategy, as well as the legislation in force.
The mission of the Ministry of Defence is to design, plan, manage, supervise, expand, implement,
evaluate and develop general state defence policies within the framework of democratic
governance and in accordance with the Constitution and laws of the Republic of Kosovo. Since
2019, a new chapter has been opened for the Ministry of Defence (MoD) and the Kosovo Security
Force (KSF) which is related to the realization of our goals, the approval of the Law on the Ministry
of Defence, the Law on the KSF and the Law on Service in KSF, which laws expand the mission
of the KSF as a professional military force with competencies and tasks for the protection of the
territorial integrity of the Republic of Kosovo. In the framework of meeting the objectives set out
in the Comprehensive Transition Plan (CTP), MoD and KSF are in the second year of transition
(first phase) which determines the establishment of priority units and the development of the
necessary skills in order to fulfil the constitutional and legal mission.
The current and future strategic, global, regional and internal security environment requires
flexibility and action, timely decisions on the development of defence capabilities and capacities
for the Republic of Kosovo, in order to deal with a variety of security challenges. Therefore, the
Ministry of Defence and the KSF, by following these developments closely, will address the
requests for new military projects to the institutions of the Republic of Kosovo. Based on CTP
certain priorities for the first year of transition have been successfully implemented in all
administrative planned actions. However, during 2018 and 2019, there have been procedural
challenges and delays in the execution of projects related to the planned military purchases to
achieve the capabilities and capacities for the protection of the territory. One of the main challenges
in this regard is the lack of a legal framework for long-term procurement of military equipment
and systems. MoD / KSF remains continuously engaged in effective and efficient planning for the
development of KSF's capacities and operational capabilities in conducting operations, for the
52
protection of the territory, for responding to crises in military support to civilian authorities and
for participation in international operations.
The Ministry of Defence, based on its strategy, and especially on the recommendations of the
Strategic Review of the Security Sector (RSSS), has defined its objectives which are:
• Continuation of transition and defence planning;
• Readiness and operations of the Kosovo Security Force;
• Capacity development, standardization and modernization;
• Inter-institutional and international cooperation and
• Strengthen transparency, accountability, integrity and reliability.
Defense Sector Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 49,703,787 63,602,303 60,455,674 64,128,837 65,766,381
Number of employees 3,455 3,636 3,636 3,636 3,636
Wages and allowances 21,973,358 23,504,455 27,371,977 27,508,837 27,646,381
Goods and services 9,450,545 9,067,683 10,204,993 11,400,000 11,400,000
Utilities 651,461 639,461 988,000 1,000,000 1,000,000
Subsidies and transfers -
Capital expenditures 17,628,423 30,390,704 21,890,704 24,220,000 25,720,000
Reserves - -
Sources of financing
Government grants 44,376,315 62,102,303 60,455,674 64,128,837 65,766,381
Own source revenues
Revenues from PAK 5,327,472 1,500,000 -
Dedicated revenues
Financing from borrowing - - - - -
Financing from budget deficit
(2%) – 04
Financing from Investment
clause - 06
Donor grants *
* Donor grants are not part of total expenditures according to sources of financing
53
3.3. RULE OF LAW AND PUBLIC SAFETY
The mission of the Rule of Law and Public Safety is to prepare public policies, legal acts and
mandatory standards in the field of justice in accordance with the Constitution and applicable law
and to ensure an independent, impartial professional and effective system of the prosecutorial and
judicial system. Part of this mission is also the creation, preservation, increasing and protection of
life safety and free movement for all citizens of Kosovo.
The Ministry of Justice, as the bearer of the legal sector, will manage and implement various
reforms and measures in the field of rule of law, in order to increase efficiency, accountability and
inclusiveness in meeting the needs and priorities of citizens in the field of rule of law. This sector
is committed to fulfilling the obligations arising from some strategic and planning documents,
including: Government Program 2020-2023, National Development Strategy 2016-2021, Kosovo
Program for Economic Reform 2020, National Program for Implementation of the Agreement of
the Stabilization and Association (PKMMSA) and the Legislative Program for 2020. It should be
noted that we have currently entered at the final phase of the Functional Review Process of the
Rule of Law Sector. The main goal of this process is to identify the main problems that hinder the
proper functioning of the rule of law and, consequently, to address them through clear and well-
thought-out measures, which will ensure the well-being of this sector and building trust of the
citizens in justice domain. In the end, this process will be finalised with the drafting of the Sectoral
Strategy for the Rule of Law. The Public Security Sector has successfully implemented its policies
towards meeting the objectives set for 2020. The fight against organized crime, corruption and
terrorism, the protection of public safety, the increase of security of documents and the
improvement of services to citizens were among the main priorities of the MIA.
In order to advance the necessary policies for meeting the objectives, the State Strategy Against
Organized Crime 2018-2022, the State Strategy against Narcotics 2018-2022 and the State
Strategy against Terrorism 2018-2022 have been approved. The Ministry of Internal Affairs is
continuing its activities and efforts for membership in the International Criminal Police
Organization INTERPOL and in signing of a cooperation agreement with the European Union
Agency for Cooperation in the Implementation of the EUROPOL Law.
In the field of the fight against terrorism, organized crime and corruption, the ministry has
implemented its policies. During 2019, the Kosovo Police has identified 40,128 cases, of which
26,895 criminal offenses of various natures and 9348 persons have been arrested. Compared to the
same period of 2018, the number of cases decreased by 8.81percentand the number of criminal
offenses decreased by 16.27%. In order to strengthen preventive measures against violent
extremism as well as de-radicalization and reintegration of persons returned from conflict areas,
the Division for Prevention and Reintegration of Radicalized Persons within the Ministry of
Internal Affairs has prepared and provided standard packages of services for persons returning
from conflict areas.
54
The main strategic objectives within the rule of law sector and public safety are:
• Strengthening the rule of law by reviewing the justice system and respecting human rights;
• Improving the legal and institutional infrastructure of the justice system;
• Fight against organized crime, corruption, and terrorism, as well as efficient migration and border
control management;
• Raising the level of quality of public services through capacity building of e-Government (State
Data Centre, State Network and Electronic Systems);
• Ensuring the independence of the judicial and prosecutorial system of Kosovo;
• More efficient administration of the system of execution of criminal sanctions;
• Maintaining public safety and improving services for citizens;
• Increasing the quality of the legal framework for the facilitation and better functioning of the
Constitutional Court of Kosovo;
• Strengthening the institutional and professional capacities for increasing the efficiency and
effectiveness of the administration of the prosecutorial and judicial system;
• Investigation and treatment of cases according to the submissions, based on the Constitution of
the Republic of Kosovo, other legal provisions and according to various international conventions
on human rights, as a fundamental responsibility in the functioning of the Ombudsperson
Institution and
• Provision of free legal counselling, ensuring equal access to justice for all citizens of the Republic
of Kosovo, especially for marginalised groups.
In order to achieve the above objectives, the implementation of activities, respectively concrete
actions, identified in many of the strategic documents of this sector will continue. Budget
organizations that are part of Rule of Law Sector and Public Safety are: Ministry of Justice, Ministry
of Internal Affairs, Kosovo Judicial Council, Kosovo Prosecutorial Council, Kosovo Intelligence
Agency, Kosovo Constitutional Court, Ombudsperson Institution and Agency for Free Legal
Counselling.
Rule of Law and
Public Security Sector
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 231,784,886 232,841,026 234,976,080 243,636,838 247,339,645
Number of employees 15,967 16,317 16,421 16,421 16,421
Wages and allowances 137,162,328 142,964,134 139,862,394 140,561,706 141,264,513
Goods and services 47,920,036 45,919,308 44,415,017 49,951,463 49,951,463
Utilities 6,561,296 5,429,374 6,745,799 6,745,799 6,745,799
Subsidies and transfers 3,588,779 10,219,367 10,069,367 10,069,367 10,069,367
Capital expenditures 36,552,447 28,308,843 33,883,503 36,308,503 39,308,503
55
Reserves - - - - -
Sources of financing
Government grants 219,889,425 223,823,439 232,313,493 240,974,251 244,677,058
Own source revenues 2,254,254 2,662,587 2,662,587 2,662,587 2,662,587
Revenues from PAK 9,641,207 6,355,000 - - -
Dedicated revenues - - - - -
Financing from
borrowing - - - - -
Financing from budget
deficit (2%) – 04 - - - - -
Financing from
Investment clause - 06 - - - - -
Donor grants * - - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.4. ECONOMIC ISSUES
Within this sector, it is intended that human, natural, physical and financial resources be used
effectively and efficiently in order to ensure sustainable socio-economic development. The main
objectives within the sector for the next three-year period are:
• Creating favourable conditions for increasing domestic productivity and export competition, as
well as investing in the protection of industrial property and the quality infrastructure system;
• Encouraging investment and exports, market surveillance and consumer protection;
• Ensuring sustainable energy supply, diversifying energy resources and implementing efficiency
measures in public sector buildings and in the services, household, industry and transport sectors;
• Drafting strategic policies for sustainable development of the mining sector and preventing and
stopping the informal economy in the mining sector;
• Accelerating the access and use of Information and Communication Technology through
broadband and human capital advancement to ensure inclusiveness and at the same time maximize
the benefits of the digital economy in the global market;
• Construction and maintenance of road infrastructure and development of railway infrastructure;
• Increasing the level of traffic safety;
• Normalization of the full airspace of Kosovo;
• Increasing agricultural productivity, increasing competitiveness in agriculture and increasing the
productive potential of farms;
• Improving and sustainable development of forests and their functions;
56
• Advancing entrepreneurship and private initiative through innovation with a focus on the
development of manufacturing SME and services;
• Improving working conditions and reducing informal employment by strengthening oversight
mechanisms and strengthening social dialogue.
Budget organizations that are part of the sector for economic affairs are: Ministry of Economy,
Employment, Trade , Industry, Entrepreneurship and Strategic Investments, Ministry of
Infrastructure and Environment (divisions related to road infrastructure), Ministry of Agriculture,
Forestry and Rural Development, Energy Regulatory Office, Regulatory Authority for Electronic
and Postal Communications, Kosovo Competition Authority, Railway Regulatory Authority, Civil
Aviation Authority, Kosovo Air Navigation, the Independent Commission for Mining and
Minerals and Kosovo Privatization Agency.
Economic Issues Sector
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 307,118,589 347,330,479 360,502,655 359,875,884 327,400,199
Number of employees 1,773 1,895 1,896 1,896 1,896
Wages and allowances 18,527,117 19,219,018 19,447,244 19,544,479 19,642,201
Goods and services 21,064,169 28,094,256 28,189,660 32,039,549 34,089,549
Utilities 531,139 573,116 882,148 1,032,148 1,032,148
Subsidies and transfers 64,287,583 108,326,712 63,422,043 65,759,706 65,759,706
Capital expenditures 202,708,581 191,117,377 245,561,559 239,500,002 203,876,595
Reserves - - 3,000,000 2,000,000 3,000,000
Sources of financing
Government grants 219,799,172 222,471,134 208,016,497 213,273,752 230,789,946
Own source revenues 110,151 183,155 183,155 183,155 183,155
Revenues from PAK 63,482,747 25,000,000 - - -
Dedicated revenues 6,458,847 5,699,867 4,274,917 4,289,502 4,303,838
Financing from
borrowing 17,267,672 93,976,323 148,028,085 151,129,475 92,123,260
Financing from budget
deficit (2%) – 04 17,195,972 34,323,085 24,083,812 18,450,060 8,456,274
Financing from
Investment clause - 06 71,700 59,653,238 123,944,274 132,679,415 83,666,986
Donor grants * - - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.5. ENVIRONMENT
57
Within this sector, a balanced and sustainable development is aimed at ensuring the protection of
the environment and the development of proper spatial planning through monitoring, information
and environmental reporting. Kosovo faces problems with water, waste management, air and land
pollution. Other environmental problems are caused by unplanned spatial developments and illegal
constructions which damage the space and reduce the possibilities for the future development of
the country. While efforts have been made in recent times to address the challenges of these issues,
much remains to be done. As for the next period, the Government intends to take concrete actions
towards improving the current situation. The main objectives of the environmental sector are:
• Completion of legal infrastructure in the field of environment and their harmonization with EU
legislation and its implementation;
• Improving the state of the environment and monitoring its condition;
• Establishment of an efficient administrative system for spatial planning, construction, housing,
energy efficiency in buildings and cadastre;
• Better administration and management of water resources and rehabilitation of river beds and
waste management;
• Strengthening the environmental inspectorate, water, nature, spatial planning, housing and
construction;
• Advancing tariff policies, raising water service standards and reducing water losses and
• Strengthening of Expropriation at the national level.
The objectives listed above will be achieved by focusing on the implementation of field respective
actions, such as initially drafting primary and secondary legislation, preventing and reducing
environmental pollution and integrated access to pollution control and monitoring the
implementation of environmental permits, improving monitoring and reporting on air quality, etc.
Environment Sector Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 43,824,594 48,500,158 35,345,450 51,536,970 60,106,540
Number of employees 354 329 329 329 329
Wages and allowances 2,437,442 2,326,217 2,337,848 2,349,537 2,361,285
Goods and services 1,479,144 5,782,680 2,692,813 2,249,550 2,249,550
Utilities 60,581 65,817 74,723 74,723 74,723
Subsidies and transfers 200,000 - - - -
Capital expenditures 39,647,427 40,325,444 30,240,066 46,863,160 55,420,982
Reserves - - - - -
Sources of financing
58
Government grants 43,824,594 19,938,158 18,340,450 18,321,970 19,131,540
Own source revenues - - - - -
Revenues from PAK - 22,000,000 - - -
Dedicated revenues - - - - -
Financing from borrowing - 6,562,000 17,005,000 33,215,000 40,975,000
Financing from budget
deficit (2%) – 04 - 400,000 300,000 300,000 -
Financing from Investment clause - 06
- 6,162,000 16,705,000 32,915,000 40,975,000
Donor grants * - - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.6. HOUSING AND COMMUNITY ISSUES
Within this sector, the purpose is to create conditions for sustainable return of displaced persons,
protection, integration and development of communities living in Kosovo, as well as the resolution
of property issues related to the original cadastral documents before June 1999.
In regard to this sector, key targets for the next three years’ period are:
Return, reintegration into Kosovo and construction of the necessary infrastructure for the
normal functioning of returnees;
Stabilization of communities and closure of collective centers in Kosovo;
Accepting, comparing and resolving the differences between the cadastral documents
obtained by the Serbian authorities and the current cadastral documents in Kosovo for
private, commercial property and religious communities;
Implementation of the decisions of the Kosovo Property Claims Commission and the
decisions of the Supreme Court, the destruction of illegal structures in private properties
and the administration of the lease scheme.
These objectives will be achieved through the undertaking of respective actions: construction of
houses for returnees, construction of collective residential buildings, construction of schools and
health centers, construction of roads and irrigation and sewerage systems, etc. The budgetary
organizations comprising the sector for housing and community issues are: The Ministry of
Communities and Returns and the Kosovo Property Comparison and Verification Agency.
59
Housing and Community
Issues Sector
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 9,992,742 7,175,364 6,775,483 6,922,175 6,932,762
Number of employees 304 320 320 320 320
Wages and allowances 1,956,981 2,096,392 2,106,875 2,117,410 2,127,997
Goods and services 1,495,618 1,246,104 981,585 967,742 967,742
Utilities 60,376 61,976 105,523 105,523 105,523
Subsidies and transfers 288,325 300,000 300,000 300,000 300,000
Capital expenditures 6,191,442 3,470,892 3,281,500 3,431,500 3,431,500
Reserves - - - - -
Sources of financing
Government grants 9,038,105 7,175,364 6,775,483 6,922,175 6,932,762
Own source revenues - - - - -
Revenues from PAK 954,637 - - - -
Dedicated revenues - - - - -
Financing from borrowing - - - - -
Financing from budget
deficit (2%) – 04 - - - - -
Financing from Investment
clause - 06 - - - - -
Donor grants * - - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.7. HEALTH
Within this sector is aimed at maintaining health, promoting healthy lifestyles and providing
quality services with safe, easy and equal access, without financial and cost-effective risk.
In order to continue the reform in the health sector and achieve the objectives set by the Health
Sector Strategy 2017-2021, the Ministry of Health in 2019 is focused on the functioning of the
Health Insurance Fund which is a precondition for the establishment of a stable financing system
in health sector. The Health Sector in order to maintain and improve health and increase the quality
of health services in 2019 has intensified efforts to create infrastructural and diagnostic conditions
for the provision of quality health services, however, the implementation of infrastructure projects
has faced challenges and delays in all projects as a result of shortcomings in the initial projects and
inadequate implementation by economic operators, with emphasis on the emergency project that
60
is under court proceeding. In 2018-2019 started the extension of the basic system of health
information in primary health care. So far, the basic health information system has been extended
to 29 municipalities and 14 specialist ambulances. The Health Sector at the beginning of 2020 is
fully focused on taking measures to prevent and combat pandemic COVID-19 in order to maintain
the health of the citizens of the Republic of Kosovo.
Based on the Health Sector Strategy 2017-2021 and the Government Program 2020-2023, the goal
is to meet the four strategic priorities/objectives:
Protection of health and improvement of the quality of provided health services;
Reorganization of health sector and
Ensuring of sustainable health funding.
In order to achieve these objectives, actions such as providing and improving accessible and equal
health services, implementing an action plan for education and health promotion, maternal and
child health, reproductive health, and implementation of assessment of environment impact on
health will be undertaken, full functionalization of the Health Insurance Fund, implementation of
the Basic Health Services Package and contracting, development of the health information system
and integration of information technology (in Hardware and Software) in all health institutions.
Budgetary Organizations comprising this sector are: The Ministry of Health, Kosovo University
Clinical Hospital Service, and the Health Insurance Fund.
Health Sector Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 159,420,299 209,142,563 172,120,695 169,035,435 198,391,308
Number of employees 8,364 8,571 8,571 8,571 8,571
Wages and allowances 70,475,341 69,721,632 70,820,537 71,174,639 71,530,512
Goods and services 51,407,528 71,539,253 62,859,889 61,103,527 61,103,527
Utilities 3,936,108 2,913,527 3,833,964 3,833,964 3,833,964
Subsidies and transfers 10,629,011 10,293,805 8,813,805 8,813,805 8,813,805
Capital expenditures 22,972,311 54,674,346 25,792,500 24,109,500 53,109,500
Reserves -
Sources of financing -
Government grants 150,316,689 194,239,631 172,120,695 169,035,435 198,391,308
Own source revenues - - - - -
Revenues from PAK 7,386,532 9,645,000 - - -
Dedicated revenues - - - - -
Financing from borrowing 1,717,078 5,257,932 - - -
61
Financing from budget
deficit (2%) – 04 1,717,078 5,257,932 - - -
Financing from
Investment clause - 06 -
Donor grants * 221,130
* Donor grants are not part of total expenditures according to sources of financing
3.8. RECREATION, CULTURE AND RELIGION
Within this sector, the purpose is to create and develop policies, environment and mechanisms for
the promotion and increase of sports, cultural and youth activities, evidence, assessment and
protection of cultural heritage, as well as regulation, management and supervision of the
broadcasting frequency spectrum.
Key objectives of recreation, culture and religion sector are:
Supporting independent culture, supporting publishing activity as well as advancing
cultural diplomacy;
Advancing of legal and institutional system of protection, preservation of cultural heritage,
continuous approximation with EU legislation as well as commitments towards European
Partnership Priorities and UNESCO membership;
Education, promotion and civic awareness, study and objective and inclusive interpretation
of socio-cultural and economic values, increasing the number of publications, guides,
virtual and digital media for the promotion of cultural heritage;
Creation, reflection, protection, classification, processing, use and preservation of archival
documentation of historical and scientific value;
Design, construction and maintenance of memorial complexes;
Activation and mobilization of youth for active participation and representation,
preparation of youth for the labor market and providing a healthy and safe environment for
youth;
Financial support of sports federations, development of quality sports for all and
establishment of sports infrastructure according to international standards, and
Regulation, management and supervision of RTK digitalization and broadcasting
frequency spectrum, and implementation of digital terrestrial television broadcasting.
The budgetary organizations comprising the sector of recreation, culture and religion are: Ministry
of Culture, Youth and Sports, Kosovo Council for Cultural Heritage, Agency for Management of
Memorial Complexes, Independent Media Commission and Radio-Television of Kosovo.
62
Recreation, Culture and
Religion Sector
Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 47,116,582 54,065,301 51,132,476 52,251,637 54,280,553
Number of employees 829 855 855 855 855
Wages and allowances 5,588,734 5,717,924 5,754,126 5,782,896 5,811,812
Goods and services 2,218,658 2,675,405 2,623,342 3,013,733 3,013,733
Utilities 349,506 334,860 498,458 498,458 498,458
Subsidies and transfers 23,028,383 20,451,550 20,916,550 20,216,550 20,216,550
Capital expenditures 15,931,300 24,885,562 21,340,000 22,740,000 24,740,000
Reserves - - - - -
Sources of financing
Government grants 39,992,846 42,509,911 51,077,086 52,196,247 54,225,163
Own source revenues 17,873 55,390 55,390 55,390 55,390
Revenues from PAK 7,105,863 11,500,000 - - -
Dedicated revenues - - - - -
Financing from borrowing - - - - -
Financing from budget deficit
(2%) – 04
- - - - -
Financing from Investment
clause - 06
- - - - -
Donor grants * - - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.9. EDUCATION
This sector aims to develop a knowledge-based society and competitive skills, integrated into
European flows, with equal opportunities for the advancement of each individual to prepare and
contribute to sustainable social, economic and political development in the country. The education
sector has state and civic responsibilities in proper education to prepare them as worthy and useful
citizens for the country. This sector is undergoing a reform process that aims to increase participation
and improve the quality of education. Legislation has been drafted and numerous legal and sub-legal
acts have been also drafted and many educational facilities have been built, renovated and many new
institutions have been established. Work has been carried over to improve curricula and to design
and provide new textbooks, which should be supported by new teaching and learning practices. The
goal is also to support scientific research and participation in all education activities at the national,
63
regional and international levels, to achieve European standards. The access to knowledge, scientific
research, innovation and skills acquisition, which are in function of the accelerated development of
our society and competitive skills inside and outside Kosovo in accordance with international
standards.
The key objectives to meet the goals of the education sector are:
Increasing inclusion and preventing abandonment in pre-university education;
Quality and efficient management of the education system, based on transparency and
accountability;
Development of a functional system for quality assurance, in compliance with
international standards;
Improving the quality of teaching through a sustainable system for the preparation and
vocational development of teachers;
Advancing learning through quality teaching, implementing competency-based
curriculum and utilizing high quality teaching resources;
Education and vocational training in accordance with the requirements of the labor
market in the country and beyond, and
Improving the quality and competitiveness of high education by promoting excellence
in teaching, science research, innovation and internationalization.
The first objective is related to the increase of inclusion and quality education in early childhood,
increase the inclusion of children with special needs in pre-university quality education, increase
the inclusion of children from Roma, Ashkali and Egyptian communities in pre-university
education, and repatriated children, reduction of abandonment and non-enrollment, and support
for children with high intelligence.
The second objective concerns the increase of management capacities at the central, municipal
and school level, professionalization of the position of leading staff of educational institutions,
implementation of a funding formula that takes into account the specifics of school levels and
types, advancement of the information management system in education, reviewing and
supplementing the legislation and creating a suitable and safe environment for the educational
process.
The third objective is related to the increase of capacity for quality assurance at all levels, building
of effective mechanisms for quality assurance, advancement of development planning at school
and municipal level, increase of stakeholders’ awareness to ensure quality assurance, increasing
the reliability of the results of national tests and their use for policy making, in addition to the
results of international tests.
64
The fourth objective is related to the continuous vocational development of teachers (VDT), the
assessment of teachers’ performance, the implementation of the licensing system, the legal
harmonization of VDT documents for the phase “before service” and “in service” and the assuring
of the system for sustainable funding of teachers’ vocational development.
The fifth objective is related to the implementation of the new curriculum in all schools, drafting
of new school textbooks in accordance with the curriculum and curricula, design/provision of
electronic teaching materials in support of the implementation of the new curricula and equipping
schools with ICT tools and other concretization tools.
The sixth objective is related to the adaptation of Education and Vocational Training (EVT)
programs to the labor market requirements, the provision of teaching materials for EVT, practical
work and professional practice, ensuring the sustainability of competence centers and their further
development, counseling and career orientation, the functioning and strengthening of mechanisms
for regulating the education system.
The seventh objective is about increasing of quality standards in High Education Institutions
(HEI), adopting of study programs to the demands of the labor market, promote scientific research
and innovation in HEI, harmonization and completion of the legal framework in high education,
performance-based HEI funding, promotion of international cooperation in the field of high
education and scientific research.
To achieve the above objectives, government institutions will take respective steps, as provided by
sectoral strategies and other strategic documents, including their action plans. The budgetary
organizations that comprises the education sector are: The Ministry of Education, Science and
Technology, the University of Prishtina, the Academy of Sciences and Arts of Kosovo and the
Academy of Justice.
Education Sector Year 2019
Expenditure
Viti 2020
Budgeted
Viti 2021
Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 90,928,641 95,946,916 98,466,019 98,938,114 100,995,460
Number of employees 4460 4349 4349 4349 4349
Wages and allowances 39,753,080 41,585,643 41,262,679 41,468,992 41,676,337
Goods and services 24,566,882 18,697,683 20,250,306 21,395,876 21,395,876
Utilities 1,851,245 1,975,622 2,786,959 2,786,959 2,786,959
Subsidies and transfers 3,157,487 8,376,300 8,110,803 9,110,803 9,110,803
Capital expenditures 21,599,947 25,311,668 26,055,272 24,175,485 26,025,485
Reserves - - - - -
Sources of financing
Government grants 79,380,326 82,716,601 91,635,704 92,107,799 94,165,145
65
Own source revenues 3,685,499 6,230,315 6,830,315 6,830,315 6,830,315
Revenues from PAK 6,915,281 7,000,000 - - -
Dedicated revenues - - - - -
Financing from borrowing 947,534 - - - -
Financing from budget
deficit (2%) – 04
947,534 - - - -
Financing from Investment clause - 06
- - - - -
Donor grants * 354,921 - - - -
* Donor grants are not part of total expenditures according to sources of financing
3.10. SOCIAL PROTECTION
This sector intends to define a sustainable system for funding of social services and continuous
implementation of pension benefits and schemes, providing services to the most vulnerable groups
in society, and where ever is necessary reforming of current social policies, reforming the pension
system in terms of legislative, organizational and international cooperation. Specific attention will
be paid to the aspect of strengthening the mechanisms of cooperation with social partners.
The key objectives for the next three-year period are:
Increasing welfare through the restructuring of social services by increasing the level of
employment for marginalized groups, drafting Concept Documents on the Social
Assistance Scheme, Child Allowances, supplementing and amending of primary and
secondary legislation on the benefits of persons with disabilities, creating of affordable
housing scheme and development of international agreements on Pension matters;
Increasing social welfare through expanding and raising quality, providing social and
family services, with a specific focus on groups in need and gender equality;
Development of a sustainable pension system and increase of institutional capacities for
the realization of the rights for benefits and better services for pensioners.
Budgetary organizations that comprise the Social Protection Sector is the Ministry of Labour and
Social Welfare.
Social Protection Sector Year 2019
Expenditure
Viti 2020
Budgeted Viti 2021 Estimated
Viti 2022
Estimated
Viti 2023
Estimated
Total 498,934,717 481,075,414 497,852,293 503,241,351 507,267,088
Number of employees 808 812 812 812 812
Wages and allowances 5,158,822 5,192,652 5,121,761 5,147,370 5,173,107
66
Goods and services 1,890,400 1,403,823 1,624,046 1,804,496 1,804,496
Utilities 315,803 218,065 369,485 369,485 369,485
Subsidies and transfers 489,007,584 471,677,632 489,200,000 494,200,000 499,200,000
Capital expenditures 2,562,108 2,583,241 1,537,000 1,720,000 720,000
Sources of financing - - - - -
Government grants
Own source revenues 498,235,043 481,075,414 497,852,293 503,241,351 507,267,088
Revenues from PAK - - - - -
Financing from borrowing 699,674 - - - -
Financing from budget deficit
(2%) – 04 - - - - -
Financing from Investment
clause - 06 -
Donor grants * -
Donor grants are not part of total expenditures according to sources of financing
67
PART FOUR
4. Municipal level
This document defines government grants for municipal funding for 2021 and orientations for the years
2022-2023, based on the Government's strategic priorities in the field of intergovernmental fiscal relations.
Also, this document determines the level of own source municipal revenues for the fiscal year 2021 and
the medium-term forecast 2022-2023.
The principles, criteria and formulas applied for the allocation of government grants for municipal funding
for 2021 are based on the Law on Local Government Finances (LFPL) and Table 1 of macro-fiscal
projections, prepared by the Ministry of Finance and Transfers as specified in the Law on Public Financial
Management and Liability (LPFML).
The municipal budget process takes into account the following aspects:
• Budgeting at the level of programs and sub-programs, in accordance with the existing structure of
the accounting plan,
• Improving results-oriented and performance-oriented budgeting approaches,
• Implementation of the multi-year concept on capital project planning as well
• Determining the structure of expenditures according to expenditure categories.
Multi-year capital projects should be reported in the Performance Public Investment Projects (PIP) system
based on performance. As a result, municipalities are required to design a draft strategy based on results-
oriented goals and objectives.
Sources of Municipal Financing for the year 2021-2023
4.1. General Grant
Based on Table 1, presented below, prepared by the Department of Economic, Public Policy and
International Financial Cooperation of the Ministry of Finance and Transfers in accordance with the LFPL,
the General Grant for Municipalities for 2021 has been approved in the amount of 182.58 million euros .
This division is based on the formula set out in Article 24 of the LFPL. According to this article, 10percentof
the total budgeted revenues of the Central Government are allocated to municipalities, excluding: budget
support and grants, property tax revenues, interest income revenues and taxes, encumbrances and others
from the local government.
As shown in the following table, based on the estimates of the Department of Economic, Public Policy and
International Financial Cooperation, the total government revenues for 2021 are expected to be 1,921.8
million euros. From this amount, the revenues are deducted as specified in Article 24 of the LFPL and we
68
come to the basis for the allocation of the general grant for municipalities, which grant for 2021 is in the
amount of 182.58 million euros.
Table 7 Determining the value of the General Grant for municipalities 2021-2023 (mil. Euro)
Përshkrimi Year 2018 Year 2019 Yar 2020 Year 2021 Year 2022 Year 2023
A. General revenues of the Government 1,896.00 1,920.3 2,060.5 1,921.8 2,025.8 2,121.3
Deducted:
Dedicated revenues -50 -9.2
Budgetary support and grants -5 -5 (10.5) (15.0) (15.0) (15.0)
Property Tax -30 -30 (33.2) (30.0) (40.1) (42.9)
Revenues from dividents -5
Donors determined grants -12
Taxes, fees and others from Local Government -52 -57 (50.0) (48.0) (50.5) (53.6)
Simultanous revenues from debts -6 -8
Revenues from interest -4.2 (4.0) (3.0) (3.0) (3.0)
B. Basis for calculation of general grant for municipalities 1,736 1,806.9 1,962.8 1,825.8 1,917.2 2,006.8
C. General Grant from municipalities (10%) 173.60 180.69 196.28 182.58 191.72 200.68
In order to level the low capacity of own source revenues of smaller municipalities, based on LFPL, each
municipality will receive a fixed total amount of 140,000 euros per year, deducting 1 euro per capita or 0
euros for municipalities with a population equal to or greater than 140,000 inhabitants. After that, the
distribution made in the municipalities is based on the formula for allocating the general grant in the
municipalities according to LFPL:
(i) the population number is calculated with eighty-nine percent (89%); (ii) the geographical dimensions of
the municipality by six percent (6%); (iii) the number of the minority population in the municipality by
three percent (3%);
(iv) municipalities where the majority of the population consists of two percent minorities (2%).
69
Table 8 General Grant Structure for 2021-2023 according to LFPL (mil. Euro)
Factors Year 2018 Year 2019 Year 2020 Year 2021 Year 2022 Year 2023
General Grant 173.6 180.69 196.28 182.58 191.72 200.68
Formula correction contingency (2.7%) 4.7 4.9
Fixed amount 3.6 3.6 3.6 3.6 3.6 3.6
Population(inhabitants) 1,780,021 1,780,021 1,780,021 1,780,021 1,780,021 1,780,021
Budget: 89% of aggregate amount 147.1 153.3 171.5 159.3 167.4 175.4
Municipal zone (km2) 10,901 10,901 10,901 10,901 10,901 10,901
Budget: 6% of aggregate amount 9.92 10.33 11.56 10.74 11.29 11.82
Minority community in the municipality 107,926 107,926 107,926 107,926 107,926 107,926
Budget: 3% of aggregate amount 5.0 5.2 5.8 5.4 5.6 5.9
Population of minority municipalities 62,031 62,031 62,031 62,031 62,031 62,031
Budget: 2% of aggregate amount 3.3 3.4 3.9 3.6 3.8 3.9
70
Viti 2
021
Year 2
022
Year 2
023
1,8
25
.8
1,9
17
.2
2,0
06
.8
10
%1
82
,58
0,0
00
1
91
,72
0,0
00
2
00
,68
0,0
00
Fix
ed a
mou
nt
14
0,0
00
3
,63
6,6
57
3
,63
6,6
57
3
,63
6,6
57
Tota
l 1
78
,94
3,3
43
1
88
,08
3,3
43
1
97
,04
3,3
43
89
%159,2
59,5
75
167,3
94,1
75
175,3
68,5
75
6%
10,7
36,6
01
11,2
85,0
01
11,8
22,6
01
3%
5,3
68,3
00
5,6
42,5
00
5,9
11,3
00
M
un
icip
alitie
s w
ith m
inority
popu
latio
n
2%
3,5
78,8
67
3,7
61,6
67
3,9
40,8
67
Po
pu
llsia
8
9%
Ge
og
rap
hic
al
size
6%
Min
ority
po
pu
latio
n in
mu
nic
ipalitie
s
3%
Mu
nic
ipaliti
es w
ith
min
ority
po
pu
latio
n
2%
1D
eçan
40,0
19
2.2
5%
297
2.7
2%
551
0.5
1%
0.0
0%
99,9
81
3,5
80,5
25
292,5
45
27,4
07
-
4
,00
0,4
57
4
,19
9,6
84
4
,39
4,9
88
2D
ragash
33,9
97
1.9
1%
430
3.9
4%
13,5
59
12.5
6%
0.0
0%
106,0
03
3,0
41,7
33
423,5
44
674,4
32
-
4
,24
5,7
12
4
,45
7,1
58
4
,66
4,4
41
3F
eriza
j108,6
10
6.1
0%
345
3.1
7%
4,1
93
3.8
9%
0.0
0%
31,3
90
9,7
17,4
04
339,8
23
208,5
62
-
1
0,2
97
,17
8
10
,82
1,5
30
1
1,3
35
,55
6
4F
ush
ë K
oso
vë
34,8
27
1.9
6%
83
0.7
6%
4,5
11
4.1
8%
0.0
0%
105,1
73
3,1
15,9
93
81,8
79
224,3
80
-
3
,52
7,4
25
3
,70
2,2
26
3
,87
3,5
84
5G
jakovë
94,5
56
5.3
1%
587
5.3
9%
6,6
79
6.1
9%
0.0
0%
45,4
44
8,4
59,9
84
578,2
97
332,2
17
-
9
,41
5,9
42
9
,89
4,5
65
1
0,3
63
,76
2
6G
jilan
90,1
78
5.0
7%
392
3.6
0%
2,2
64
2.1
0%
0.0
0%
49,8
22
8,0
68,2
81
386,2
31
112,6
13
-
8
,61
6,9
47
9
,05
4,5
35
9
,48
3,5
06
7G
llogoc
58,5
31
3.2
9%
276
2.5
3%
45
0.0
4%
0.0
0%
81,4
69
5,2
36,8
05
271,9
76
2,2
38
-
5
,59
2,4
88
5
,87
3,9
78
6
,14
9,9
24
8H
ani i E
lezit
9,4
03
0.5
3%
83
0.7
6%
44
0.0
4%
0.0
0%
130,5
97
841,2
92
81,8
79
2,1
89
-
1
,05
5,9
57
1
,10
3,2
22
1
,14
9,5
57
9Isto
g39,2
89
2.2
1%
454
4.1
7%
3,0
85
2.8
6%
0.0
0%
100,7
11
3,5
15,2
11
447,2
98
153,4
50
-
4
,21
6,6
70
4
,42
6,9
03
4
,63
2,9
96
10
Junik
6,0
84
0.3
4%
74
0.6
8%
4
0.0
0%
0.0
0%
133,9
16
544,3
39
73,0
15
199
-
7
51
,46
9
78
3,0
12
8
13
,93
4
11
Kaçanik
33,4
09
1.8
8%
211
1.9
4%
36
0.0
3%
0.0
0%
106,5
91
2,9
89,1
24
207,9
54
1,7
91
-
3
,30
5,4
59
3
,46
8,8
50
3
,62
9,0
23
12
Kam
enic
ë36,0
85
2.0
3%
424
3.8
9%
1,8
64
1.7
3%
0.0
0%
103,9
15
3,2
28,5
47
417,7
49
92,7
16
-
3
,84
2,9
28
4
,03
3,9
08
4
,22
1,1
27
13
Klin
ë38,4
96
2.1
6%
309
2.8
4%
1,2
41
1.1
5%
0.0
0%
101,5
04
3,4
44,2
61
304,4
79
61,7
28
-
3
,91
1,9
72
4
,10
6,6
02
4
,29
7,3
99
14
Leposa
viq
13,7
73
0.7
7%
539
4.9
5%
323
0.3
0%
13,7
73
22.2
0%
126,2
27
1,2
32,2
79
531,0
19
16,0
66
794,6
31
2
,70
0,2
22
2
,83
1,6
96
2
,96
0,5
80
15
Lip
jan
57,6
05
3.2
4%
338
3.1
0%
3,1
07
2.8
8%
0.0
0%
82,3
95
5,1
53,9
55
333,0
43
154,5
44
-
5
,72
3,9
37
6
,01
2,0
93
6
,29
4,5
75
16
Malish
evë
54,6
13
3.0
7%
306
2.8
1%
54
0.0
5%
0.0
0%
85,3
87
4,8
86,2
59
301,5
25
2,6
86
-
5
,27
5,8
56
5
,54
0,9
73
5
,80
0,8
69
17
Mam
ush
ë
5,5
07
0.3
1%
32
0.2
9%
379
0.3
5%
5,5
07
8.8
8%
134,4
93
492,7
15
31,6
47
18,8
52
317,7
25
9
95
,43
1
1,0
39
,40
6
1,0
82
,51
5
18
Mitro
vic
ë71,9
09
4.0
4%
331
3.0
4%
2,1
99
2.0
4%
0.0
0%
68,0
91
6,4
33,7
43
326,1
48
109,3
80
-
6
,93
7,3
62
7
,28
8,2
27
7
,63
2,1
84
19
Novo B
ërd
ë6,7
29
0.3
8%
204
1.8
7%
3,2
02
2.9
7%
0.0
0%
133,2
71
602,0
48
201,0
59
159,2
69
-
1
,09
5,6
47
1
,14
4,8
03
1
,19
2,9
91
20
Obiliq
21,5
49
1.2
1%
105
0.9
6%
1,6
55
1.5
3%
0.0
0%
118,4
51
1,9
28,0
02
103,5
48
82,3
21
-
2
,23
2,3
22
2
,34
0,2
94
2
,44
6,1
39
21
Pejë
96,4
50
5.4
2%
603
5.5
3%
8,3
34
7.7
2%
0.0
0%
43,5
50
8,6
29,4
41
594,0
57
414,5
38
-
9
,68
1,5
85
1
0,1
73
,87
3
10
,65
6,4
66
22
Poduje
vë
88,4
99
4.9
7%
633
5.8
1%
849
0.7
9%
0.0
0%
51,5
01
7,9
18,0
60
623,6
05
42,2
30
-
8
,63
5,3
96
9
,07
3,8
41
9
,50
3,6
51
23
Prish
tinë
198,8
97
11.1
7%
514
4.7
2%
4,1
46
3.8
4%
0.0
0%
17,7
95,4
37
506,3
95
206,2
24
-
1
8,5
08
,05
7
19
,45
3,4
04
2
0,3
80
,13
5
24
Prizre
n177,7
81
9.9
9%
603
5.5
3%
31,6
82
29.3
6%
0.0
0%
15,9
06,1
76
594,0
57
1,5
75,8
81
-
1
8,0
76
,11
3
18
,99
9,3
97
1
9,9
04
,49
9
25
Rahovec
56,2
08
3.1
6%
278
2.5
5%
944
0.8
7%
0.0
0%
83,7
92
5,0
28,9
64
273,9
46
46,9
55
-
5
,43
3,6
57
5
,70
6,9
16
5
,97
4,7
93
26
Shtë
rpcë
6,9
49
0.3
9%
248
2.2
8%
3,1
82
2.9
5%
0.0
0%
133,0
51
621,7
31
244,3
97
158,2
74
-
1
,15
7,4
54
1
,20
9,7
78
1
,26
1,0
72
27
Shtim
e27,3
24
1.5
4%
134
1.2
3%
858
0.7
9%
0.0
0%
112,6
76
2,4
44,6
95
132,1
12
42,6
77
-
2
,73
2,1
61
2
,86
5,9
58
2
,99
7,1
20
28
Skendera
j50,8
58
2.8
6%
374
3.4
3%
109
0.1
0%
0.0
0%
89,1
42
4,5
50,2
97
368,5
02
5,4
22
-
5
,01
3,3
62
5
,26
4,8
79
5
,51
1,4
43
29
Suhare
kë
59,7
22
3.3
6%
361
3.3
1%
575
0.5
3%
0.0
0%
80,2
78
5,3
43,3
64
355,6
97
28,6
01
-
5
,80
7,9
40
6
,10
0,4
95
6
,38
7,2
89
30
Viti
46,9
87
2.6
4%
270
2.4
8%
258
0.2
4%
0.0
0%
93,0
13
4,2
03,9
56
266,0
66
12,8
33
-
4
,57
5,8
68
4
,80
4,8
42
5
,02
9,3
06
31
Vush
trri69,8
70
3.9
3%
345
3.1
7%
960
0.8
9%
0.0
0%
70,1
30
6,2
51,3
12
339,9
38
47,7
51
-
6
,70
9,1
31
7
,04
8,2
35
7
,38
0,6
61
32
Zubin
Poto
k6,6
16
0.3
7%
333
3.0
6%
995
0.9
2%
6,6
16
10.6
7%
133,3
84
591,9
38
328,1
18
49,4
92
381,7
09
1
,48
4,6
41
1
,55
3,6
60
1
,62
1,3
19
33
Zveçan
7,4
81
0.4
2%
123
1.1
3%
386
0.3
6%
7,4
81
12.0
6%
132,5
19
669,3
30
121,2
78
19,2
00
431,6
15
1
,37
3,9
41
1
,43
7,3
50
1
,49
9,5
10
34
Gra
canic
ë10,6
75
0.6
0%
131
1.2
0%
3,4
23
3.1
7%
10,6
75
17.2
1%
129,3
25
955,0
99
129,1
57
170,2
62
615,8
92
1
,99
9,7
35
2
,09
5,2
71
2
,18
8,9
26
35
Kllo
kot
2,5
56
0.1
4%
23
0.2
1%
1,1
93
1.1
1%
0.0
0%
137,4
44
228,6
87
22,7
82
59,3
40
-
4
48
,25
3
46
4,1
29
4
79
,69
2
36
Mitro
vic
a v
erio
re
12,3
26
0.6
9%
5
0.0
5%
867
0.8
0%
12,3
26
19.8
7%
127,6
74
1,1
02,8
15
5,0
53
43,1
25
711,1
46
1
,98
9,8
13
2
,08
4,9
27
2
,17
8,1
67
37
Parte
sh1,7
87
0.1
0%
29
0.2
7%
2
0.0
0%
1,7
87
2.8
8%
138,2
13
159,8
84
28,6
92
99
103,1
01
4
29
,98
9
44
4,8
92
4
59
,50
2
38
Ranillu
g3,8
66
0.2
2%
69
0.6
3%
168
0.1
6%
3,8
66
6.2
3%
136,1
34
345,8
93
68,0
90
8,3
56
223,0
48
7
81
,52
2
81
4,4
87
8
46
,80
3
1,7
80
,02
1
10
0%
10
,90
1
10
0%
10
7,9
26
1
00
%6
2,0
31
1
00
%3
,63
6,6
57
1
59
,25
9,5
75
1
0,7
36
,60
1
5,3
68
,30
0
3,5
78
,86
7
18
2,5
80
,00
0
19
1,7
20
,00
0
20
0,6
80
,00
0
Tota
l Gra
nt (1
0%
)
Popu
latio
n
Am
ou
nt fo
r
min
ority
po
pu
latio
n
in
mu
nic
ipaliti
es (3
%)
Geog
raph
ical s
ize
Min
ority
popu
latio
n
Fo
rmu
la fo
r allo
catio
n o
f Gen
eral G
ran
t for 2
02
1-2
02
3
Crite
ria
Bu
dg
et r
even
ues (m
il. €)
TO
TA
L
To
tal G
en
era
l
Gra
nt fo
r 20
23
To
tal G
en
era
l
Gra
nt fo
r 20
22
Am
ou
nt fo
r
mu
nic
ipaliti
es w
ith
min
ority
po
pu
latio
n
(2%
)
Municip
alitie
s
Crite
ria
for a
lloatio
n o
f Gen
eral G
ran
t (pu
rsu
an
t to L
FP
L)
To
tal G
en
era
l
Gra
nt fo
r 20
21
Po
pu
llsia
Ge
og
rap
hic
al s
ize
Min
ority
po
pu
latio
nM
un
icip
alitie
s w
ith
min
ority
po
pu
latio
n
Fix
ed
am
ou
nt
(14
0,0
00
-1€
)
Am
ou
nt p
er
po
pu
latio
n
(89
%)
Am
ou
nt fo
r
ge
og
rap
hic
al
size
(6%
)
Table 9 Distribution of General Grant at municipalities 2021-2023
71
4.2. Additional grant for the financing of the Capital City
Based on Law no. 06 / L-012 on the Capital of the Republic of Kosovo, Prishtina, Article 19 The Capital
of the Republic of Kosovo Prishtina receives an additional grant from the central level, at a height of not
less than 6percentof the total grant.
For 2021 the Capital, Prishtina benefits an additional grant of 10,954,800 euros, while for 2022 it benefits
11,503,200 euros and for 2023 it benefits 12,040,800 euros.
Table 10 Distribution of additional Grant for financing the Capital 2021-2023
Description Year 2018 Year 2019 Year 2020 Year 2021 Year 2022 Year 2023
General Grant for municipalities 173.60 180.69 196.28 182.58 191.72 200.68
Additional Grant for financing the Capital City(6%) 10.84 11.78 10.95 11.50 12.04
4.3. Specific grant for pre-university education
The specific grant for pre-university education according to the LFPL, is based on an open funding system,
taking into account the criteria in re-university education formula for 2021 of MEST.
The specific grant for pre-university education for 2021 has been approved by the Grants Commission in
the amount of 194.8 million euros.
The basic grant has been approved in the amount of 192 million euros as follows:
a) Salaries and allowances in the amount of 175.5 million euros;
b) Goods and services in the amount of 14 million euros;
c) Capital expenditures in the amount of 2.5 million euros.
The new policies approved by the KG are as follows:
a) Jubilee salaries according to the collective agreement for Education, at a cost of 1.1 million euros;
b) Pre-school salary for schools (2 to 5 years old) for 2021, at a cost of 1.6 million euros;
c) Goods and services for children (4 to 5 years old), at a cost of 78,848 euros;
d) Cost of payment of procedures for validation and accreditation for high vocational schools (8 schools),
at a cost of 38,400 euros.
The formula addresses the level of pre-school, primary and secondary education, based on the following
criteria:
a) Number of students enrolled for 2019/2020;
b) Student-teacher relationship for primary and secondary education for students of majority 1: 21.3 (based
on Administrative Instruction no. 22/2013 of MEST);
c) Student-teacher relationship for primary and secondary education for students of minority 1:14.2;
d) Student-teacher relationship for preschool education 1:12;
e) Student-teacher relationship for vocational secondary education for students of majority 1:17.2, and for
students of minority 1:11.5;
f) Student-teacher relationship for mountainous areas 1:14.2;
72
g) Calculation for English language teaching staff for grades I and II;
h) Calculation for technical administrative staff for 630 students 1 staff in pre-school and primary
education;i) Calculation for technical administrative staff for 470 students 1 staff in secondary education
j) Calculation for assistant staff for 170 students 1 staff (cleaner) and 1 staff per school (guard);
k) The calculation of salaries and allowances is based on the current average salary in education for each
municipality;
l) Professional Pedagogical / Psychological Service;
m) Quality coordinators;
n) Calculation of salaries for replacements during maternity leave from 3percentto 6%;
o) Goods and services are calculated according to the criteria for students (23 euros for majority students
and 25 euros for minority students) and for school (1,500 euros for pre-school and primary school and 3,250
euros for secondary school);
p) Capitals are calculated according to the criterion 7 euros per student;
q) Calculation of three salaries after retirement at a cost of 1.2 million euros;
r) Salary for child assistance with special needs at a cost of 0.6 million euros;
s) Professional practice at a cost of 3.5 million euros;
t) Jubilee salaries according to the collective contract for Education, at a cost of 1.1 million euros;
u) Pre-school salary for schools (2 to 5 years old) for 2021, at a cost of 1.6 million euros;
v) Goods and Services for children (4 to 5 years old), at a cost of 78,848 euros;
w) Cost of payment of procedures for validation and accreditation for high vocational schools (8 schools),
at a cost of 38,400 euros.
According to MEST, the number was reported to be 10,338 fewer students in pre-university education
compared to the previous year. Based on the continuous reduction of the number of students from year to
year and taking into account the teacher / student parameters according to the current situation, MEST
recommends municipalities that in case of retirement of teaching staff not to announce a competition for
admission of new staff, but to accommodate teachers who do not have a norm or do not have a full norm.
73
G
oods and
services for
schools and
pupils
Proffesional
practice
Jubilee
wages
according to
collective
contract for
education
Wage for
pre school
for schools
(2 to 5 years)
for 2021
Goods
and
services
for
children -
4 to 5
years
Paym
ent for
proceeding of
validation and
accreditation for
vocational high
secondary schools
(8 Schools)
359,811
173,644,706
619,645
1,231,239
175,495,590
10,476,508
3,500,000
13,976,508
2,494,681
191,966,779
1,068,638
1,659,239
78,848
38,400
2,845,125
194,811,904
212,460,183
213,360,111
1D
eçan5,568
3,386,274
18,471
26,167
3,430,912
165,987
32,511
198,498
38,493
3,667,903
22,460
33,5411,594
4,80062,395
3,730,297
4,040,021
4,057,737
2D
ragash3,908
2,766,888
5,976
16,434
2,789,298
152,284
-
152,284
27,048
2,968,630
17,509
21,2771,011
039,796
3,008,426
3,223,811
3,238,302
3F
erizaj24,442
11,186,186
38,027
90,313
11,314,526
672,757
260,563
933,320
169,575
12,417,421
67,137
104,8924,985
4,800181,814
12,599,235
13,739,096
13,796,427
4F
ushë Kosovë
9,801
3,029,208
24,528
19,929
3,073,665
257,349
62,576
319,925
67,991
3,461,581
17,75042,757
2,0320
62,5393,524,120
3,959,329
3,975,249
5G
jakovë 17,624
9,038,815
36,422
68,292
9,143,530
515,502
205,089
720,591
122,108
9,986,228
54,941
87,0724,138
4,800150,951
10,137,179
11,031,088
11,077,510
6G
jilan17,893
10,686,000
31,975
67,147
10,785,122
518,610
225,684
744,294
124,222
11,653,639
68,707
71,2843,387
4,800148,178
11,801,816
12,746,956
12,801,626
7G
llogoc12,194
5,755,860
18,468
32,319
5,806,647
338,176
123,416
461,592
84,462
6,352,701
30,067
61,8652,940
094,871
6,447,573
7,013,890
7,043,544
8H
ani i Elezit
1,843
752,387
12,752
4,782
769,921
52,996
-
52,996
12,768
835,685
4,5899,012
4280
14,029849,714
983,028
987,373
9Istog
7,393
3,785,736
18,201
31,851
3,835,787
225,810
42,927
268,737
51,226
4,155,751
24,27136,523
1,7360
62,5294,218,280
4,610,370
4,630,120
10Junik
808
392,155
-
1,556
393,711
23,150
-
23,150
5,600
422,461
1,4493,795
1800
5,424427,885
501,097
503,551
11K
açanik6,309
3,304,509
18,919
20,496
3,343,924
185,624
41,980
227,604
43,722
3,615,250
22,218
30,5601,452
054,230
3,669,480
4,002,671
4,019,949
12K
amenicë
4,484
4,282,987
24,096
28,613
4,335,697
172,827
39,061
211,888
31,157
4,578,741
33,08616,059
7630
49,9084,628,649
4,911,773
4,934,035
13K
linë7,864
4,011,528
18,893
34,636
4,065,057
227,585
64,391
291,976
54,397
4,411,430
30,791
45,1282,145
078,064
4,489,494
4,902,818
4,923,720
14L
eposaviq2,265
935,710
-
4,068
939,779
95,370
29,039
124,409
15,834
1,080,022
604
1,28761
01,952
1,081,974
1,162,567
1,167,765
15L
ipjan12,805
6,189,480
17,820
54,945
6,262,245
388,551
82,619
471,170
88,844
6,822,259
37,070
54,6152,595
094,280
6,916,540
7,563,566
7,595,510
16M
alishevë12,335
6,259,884
18,594
38,737
6,317,215
353,990
63,602
417,592
85,428
6,820,235
38,036
63,6273,024
0104,686
6,924,921
7,526,118
7,558,337
17M
amusha
898
404,918
6,135
3,068
414,121
28,316
-
28,316
6,216
448,653
2,0534,946
2350
7,234455,887
525,635
528,191
18M
itrovicë 16,568
7,752,299
24,610
73,831
7,850,741
459,782
216,057
675,839
114,772
8,641,352
47,938
83,0743,948
0134,959
8,776,311
9,609,735
9,649,660
19N
ovo Bërdë
1,401
952,504
5,351
5,351
963,206
77,432
17,992
95,424
9,758
1,068,388
3,2603,524
1670
6,9511,075,339
1,162,913
1,168,229
20O
biliq4,932
2,295,552
17,568
13,176
2,326,296
158,849
46,242
205,091
34,223
2,565,610
13,403
20,599979
034,981
2,600,591
2,878,781
2,890,946
21P
ejë 18,627
9,217,902
38,704
69,344
9,325,950
510,004
200,433
710,437
128,856
10,165,243
58,202
106,1125,043
4,800174,156
10,339,399
11,261,487
11,308,825
22P
odujevë17,962
8,509,704
24,864
57,498
8,592,066
511,497
197,040
708,537
124,607
9,425,210
39,606
78,0603,709
0121,375
9,546,585
10,404,033
10,447,684
23P
rishtinë45,405
18,671,616
73,728
124,416
18,869,760
1,180,998
388,398
1,569,396
314,734
20,753,890
124,614
214,52810,195
4,800354,137
21,108,027
23,193,296
23,288,592
24P
rizren30,587
14,047,488
32,160
94,872
14,174,520
867,862
315,169
1,183,031
211,722
15,569,273
89,717
164,8607,834
0262,412
15,831,684
17,270,596
17,342,299
25R
ahovec9,839
5,214,054
6,244
42,150
5,262,448
292,933
36,693
329,626
68,131
5,660,205
27,169
51,1592,431
4,80085,559
5,745,764
6,223,738
6,250,657
26S
htërpcë2,352
1,186,664
-
4,384
1,191,049
77,967
868
78,835
16,373
1,286,257
15,456
6,302299
022,057
1,308,314
1,408,562
1,415,023
27S
htime
5,780
2,710,164
6,036
36,216
2,752,416
169,295
46,715
216,010
40,089
3,008,515
15,57725,478
1,2110
42,2653,050,780
3,344,426
3,358,732
28S
kenderaj10,093
5,073,584
18,338
39,733
5,131,655
302,105
119,392
421,497
69,867
5,623,018
32,723
54,2082,576
089,507
5,712,526
6,202,980
6,229,242
29S
uharekë11,056
5,938,236
31,620
41,106
6,010,962
332,190
105,267
437,457
76,580
6,524,999
39,002
55,9022,657
097,561
6,622,559
7,204,989
7,235,669
30V
iti8,209
4,944,168
12,438
32,650
4,989,257
254,807
52,554
307,361
56,973
5,353,591
31,516
33,6771,600
4,80071,593
5,425,184
5,860,727
5,886,273
31V
ushtrri14,469
6,815,831
18,708
48,328
6,882,867
418,472
148,589
567,061
100,338
7,550,265
42,987
65,3213,104
0111,412
7,661,677
8,364,042
8,399,104
32Z
ubin Potok
1,263
391,558
-
1,100
392,658
44,942
21,306
66,248
8,820
467,726
1,3281,626
770
3,032470,758
529,286
531,734
33Z
veçan1,153
439,953
-
-
439,953
37,326
20,043
57,369
8,050
505,372
-
1,491
710
1,562506,934
562,520
565,206
34K
llokot615
331,985
-
-
331,985
23,579
11,915
35,494
4,291
371,771
725
88142
01,647
373,418
418,582
420,726
35M
itrovica e veriut4,878
1,157,664
-
-
1,157,664
152,852
159,320
312,172
34,118
1,503,955
0
1,69481
01,775
1,505,729
1,641,922
1,648,215
36P
artesh999
409,625
-
2,593
412,217
48,454
22,963
71,417
6,986
490,620
5,796
27113
06,080
496,700
550,686
553,233
37R
anillug1,192
428,713
-
-
428,713
44,416
28,723
73,139
8,344
510,197
4,589
683
04,659
514,856
572,722
575,351
38G
raqanice3,998
986,916
-
1,137
988,053
135,862
70,862
206,724
27,958
1,222,735
2,294
2,168103
04,566
1,227,300
1,350,324
1,355,765
Total
proposal of
specific grant
for
preuniversity
education for
2022
Total proposal
of specific
grant for
preuniversity
education for
2023
Municipality
Ground G
rant
for
preuniversity
education for
2021
Total
number of
pupils
Total w
ages
and allowances
Total proposal
of specific
grant for
preuniversity
education for
2021
New
policies
Cost of
new
policies
Wage and
allowance (for
Teaching,
administrative,
assistant staff)
Assistant
for children
with special
needs (100)
TO
TA
L
Capital
expenditureN
o.T
otal goods
and services
Three
wages after
retirement
Go
od
s an
d services
Table 11 Distribution of Specific Grant for Education for the year 2021-2023
74
4.4. Primary health specific grant
Health specific grant is based on an open system in line with the LFPL.
The specific grant for primary health care for 2021 has been approved by the GC in the amount of 62.6
million euros.
The specific grant for primary health care - basic grant for 2021 is in amounted to 61.7 million euros and is
prepared according to the criterion per capita (35 €) and in accordance with the recommendations of the
Grants Commission issued by the annual report on Adaptability Assessment of Municipal Financing
System.
New policy approved by GC for 2021 is care of palliative visit (visit x 20 euro) with a cost of 0.9 million
euro. Table 12 Primary health specific grant, for 2021-2023
M F
Females of
reproduction
age 15-49
years
Number of
children
from 0-14
years
Number of
elderly
persons -
over 65
years
1 Deçan 40,019 20,125 19,894 10,941 10,471 4,084 151 1,386,900.81 3,480 1,390,381 2,138,546 2,149,239
2 Dragash 33,997 17,035 16,962 8,500 10,000 5,000 497 1,178,202 9,220 1,187,422 1,814,473 1,823,545
3 Ferizaj 108,610 54,841 53,769 29,300 31,566 6,900 982 3,763,995 91,480 3,855,475 5,732,650 5,761,313
4 Fushë Kosovë 34,827 17,621 17,206 14,123 6,585 3,202 233 1,206,967 44,520 1,251,487 1,841,970 1,851,180
5 Gjakovë 94,556 47,226 47,330 25,198 25,300 9,329 1,090 3,276,938 6,320 3,283,258 4,852,885 4,877,150
6 Gjilan 90,178 45,354 44,824 24,539 23,464 6,554 180 3,125,214 41,840 3,167,054 4,086,375 4,106,807
7 Gllogovc 58,531 29,733 28,799 15,996 17,507 3,336 177 2,028,454 24,160 2,052,614 2,905,945 2,920,474
8 Hani i Elezit 9,403 4,836 4,567 1,824 2,778 560 84 325,871 0 325,871 633,811 636,980
9 Istog 39,289 19,679 19,610 10,607 10,804 2,976 486 1,361,602 20,260 1,381,862 1,981,193 1,991,099
10 Junik 6,084 2,995 3,089 2,020 1,681 450 50 210,847 33,700 244,547 355,335 357,112
11 Kaçanik 33,409 16,970 16,439 9,054 9,683 1,940 200 1,157,824 3,180 1,161,004 1,804,596 1,813,619
12 Kamenicë 36,085 18,559 17,526 23,263 5,389 4,140 242 1,250,564 27,820 1,278,384 2,596,316 2,609,297
13 Klinë 38,496 18,960 19,537 10,726 10,915 2,830 260 1,334,120 92,240 1,426,360 1,999,168 2,009,164
14 Leposavic 13,773 6,969 6,804 3,443 2,754 965 477,318 11,880 489,198 652,566 655,829
15 Lipjan 57,605 29,325 28,280 15,355 17,461 7,032 706 1,996,362 0 1,996,362 3,087,960 3,103,400
16 Malishevë 54,613 25,901 28,713 37,276 20,758 3,500 640 1,892,671 0 1,892,671 2,792,431 2,806,393
17 Mamushë 5,507 2,672 2,836 2,543 2,670 737 40 190,851 7,300 198,151 378,544 380,437
18 Mitrovicë 71,909 36,275 35,634 18,624 20,351 5,074 1,200 2,492,083 14,820 2,506,903 3,627,727 3,645,865
19 Novobërdë 6,729 3,466 3,264 1,726 1,643 732 41 233,201 6,300 239,501 336,728 338,412
20 Obiliq 21,549 10,885 10,664 5,636 6,419 1,239 340 746,803 60,900 807,703 1,655,125 1,663,401
21 Pejë 96,450 50,466 45,985 24,817 24,993 7,495 1,411 3,342,577 0 3,342,577 4,662,844 4,686,158
22 Podujevë 88,499 44,955 43,544 24,042 12,975 2,476 872 3,067,027 6,940 3,073,967 4,199,260 4,220,256
23 Prishtinë 198,897 99,355 99,543 55,375 51,884 13,231 1,600 6,892,986 57,020 6,950,006 10,003,357 10,053,374
24 Prizren 177,781 89,173 88,608 49,156 49,661 11,524 1,578 6,161,189 0 6,161,189 8,023,493 8,063,611
25 Rahovec 56,208 28,512 27,696 15,393 16,081 3,352 377 1,947,948 3,100 1,951,048 2,590,376 2,603,328
26 Shtërpcë 6,949 3,554 3,395 1,744 1,577 500 47 240,825 0 240,825 437,253 439,439
27 Shtime 27,324 13,850 13,474 5,874 7,877 1,800 253 946,942 20,340 967,282 1,441,658 1,448,866
28 Skenderaj 50,858 25,646 25,212 15,665 14,265 4,241 1,523 1,762,538 12,660 1,775,198 2,607,180 2,620,216
29 Suharekë 59,722 29,478 30,244 16,413 17,409 4,104 400 2,069,729 21,320 2,091,049 2,916,349 2,930,931
30 Viti 46,987 23,686 23,301 12,343 14,168 6,100 731 1,628,384 0 1,628,384 2,307,320 2,318,856
31 Vushtrri 69,870 36,004 33,866 18,146 19,634 4,508 750 2,421,419 4,000 2,425,419 3,266,671 3,283,004
32 Zubin Potok 6,616 3,408 3,208 1,456 1,588 476 38 229,284 97,720 327,004 400,157 402,157
33 Zveçan 7,481 3,661 3,821 1,623 1,770 531 18 259,262 40,740 300,002 493,410 495,877
34 Graçanicë 10,675 5,428 5,248 2,463 2,661 993 81 369,953 92,360 462,313 724,130 727,751
35 Kllokot 2,556 1,417 1,140 688 670 214 18 88,581 30,260 118,841 179,043 179,939
36 Mitrovica Veriore 12,326 6272.5 6053.5 2,686 2,931 879 82 427,171 20,940 448,111 613,835 616,904
37 Partesh 1,787 922 865 477 340 202 0 61,930 0 61,930 79,848 80,247
38 Ranillug 3,866 1,969 1,897 1,012 393 259 0 133,980 0 133,980 266,755 268,088
1,780,021 897,179 882,843 520,067 479,076 133,466 17,378 61,688,512 906,820 62,595,332 90,487,284 90,939,721
Gender
Total
Total specific
grant for Health
for 2023
Demography
Specific grant
for Health for
2021
Paliativ care
visits (visit x
20 euro)
New policies
Total specific
grant for
Health for
2021
Total specific
grant for Health
for 2022
Ground Grant
No Municipality Population
AgeNumber of
persons with
special needs
(reported by
municipalities)
75
4.5. Secondary health financing
Financing for secondary health for 2021 has been approved in amount of 2,603,077 euros according to MH
proposal and projections of MTEF for three minority municipalities, as follows:
Shtërpce municipality, amounted to 522,371 euros,
Mitrovica municipality, amounted to 989,935 euros, and
Graçanica municipality, amounted to 1,090,771 euros.
4.6. Residential services financing
The financing of residential services for community houses for the elderly and community houses for people
with disabilities for 2021 has been approved according to the MH proposal amounted to 2,305,000 euros.
For 2021, the staff increase of 13 and additional financing for the functioning of Residential Services for
the elderly in the Municipality of Prizren has been approved.
Table 13 Financing for residential services for 2021-2023
4.7. Funding for the Historic Center of Prizren, the Cultural Center of the village of Zym and the
Council of the Hoçë e Madhe
With the entry into force of Law No. 04/L-066 on the Historic Center of Prizren, Law No. 04/L-196 on the
Historical Cultural Center of Zym Village and Law No. 04/L-62 for the village of Hoçë e Madhe, with the
budget planning for 2021, financial funds are allocated in the amount of 69,393 euros, for the two
municipalities as follows:
Prizren municipality, amount of 44,365 euros, and
Rahovec municipality, amount of 25,028 euros.
Nr. MunicipalitiesExtra
staff
Wages and
allowance
Goods and
servicesUtilities
Capital
expenditureTotal 2021 Total 2022 Total 2023
1 Skenderaj SHKPM 90,000 75,000 10,000 10,000 185,000 185,000 185,000
2 Graqanice SHKPM/SHKPAK 170,000 144,000 16,000 20,000 350,000 350,000 350,000
3 Istog SHKPM 90,000 75,000 10,000 10,000 185,000 185,000 185,000
4 Deqan SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
5 Ferizaj SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
6 Kamenice SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
7 Vushtrri SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
8 Shtime SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
9 Lipjan SHKPAK 85,000 72,000 8,000 10,000 175,000 175,000 175,000
10 Prizren SHKPM/SHKPAK 13 175,000 147,000 18,000 20,000 360,000 360,000 360,000
11 Novobërd SHKPM 85,000 72,000 8,000 10,000 175,000 175,000 175,000
13 1,120,000 945,000 110,000 130,000 2,305,000 2,305,000 2,305,000 Total
76
4.8. Financing for the endangered environmental area of Obiliq
Pursuant to Law No. 05/L-044 on the endangered environmental area of Obiliq and around it Article 9,
Obiliq benefits from the collection of mining rent by the respective institution, 20percentof the value of this
rent is reallocated from the Central Budget to the Municipal Budget of the Municipality of Obiliq,
specifically dedicated to investments in community development in the location where the business unit is
located in the field of environmental protection, infrastructure, sports, health and education.
For 2021, the Municipality of Obiliq, based on the collection of the mining rent, benefits extra financing of
4,600,000 euros.
4.9. Financing for Theatre
Financing for theatres for 2021 has been approved in amount of 900,000 as in attached table below:
Table 14 Financing for theatres for 2021
MunicipalitiesWages and
allowance
Subsidies and
transfersTotal
Teatri Profesionist Gjilan 100,886 100,886
Teatri Profesionist Gjakovë 73,443 42,500 115,943
Teatri Profesionist Prizren 111,558 29,750 141,308
Teatri Profesionist Pejë 85,639 43,500 129,139
Teatri Profesionist Ferizaj 94,788 18,700 113,488
Teatri Profesionist Mitrovicë 100,886 68,500 169,386
Teatri Profesionist Podujevë 79,800 50,050 129,850
Totali 647,000 253,000 900,000
4.10. Projections of Municipal Own Source Revenues for 2021 and forecasts 2022-2023
The projections of own source municipal revenues for 2021 based on macro-fiscal assessments are in the
amount of 78 million euros. These revenues are added to municipal funding in addition to municipal
grants.
This projection considered revenues of immovable property tax according to the property tax invoicing (tax
burden) and the trend of increasing non-tax revenues during the last three years, excluding revenues from
traffic fines and revenues by the courts.
Table 15 Projections of municipal own source revenues for 2021-2023
77
1 Deçan 537,024 799,528 933,255 109,140 301,756 320,280 646,165 1,101,284 1,253,535
2 Dragash 230,222 319,464 353,500 184,833 187,153 198,642 415,055 506,618 552,142
3 Ferizaj 2,693,566 3,766,930 4,194,386 1,751,063 2,603,127 2,762,923 4,444,628 6,370,057 6,957,309
4 Fushë Kosovë 831,722 1,060,168 1,089,171 1,857,932 1,811,700 1,922,914 2,689,654 2,871,869 3,012,085
5 Gjakovë 1,729,530 2,315,756 2,487,247 1,648,728 1,645,415 1,746,421 3,378,258 3,961,171 4,233,667
6 Gjilan 1,856,707 2,507,975 2,714,011 2,191,327 2,269,499 2,408,814 4,048,034 4,777,474 5,122,826
7 Gllogoc 495,709 650,580 686,583 810,951 763,050 809,891 1,306,660 1,413,630 1,496,473
8 Hani i Elezit 147,203 209,906 237,309 141,420 172,920 183,535 288,624 382,826 420,844
9 Istog 435,663 599,828 659,523 638,517 658,687 699,121 1,074,179 1,258,515 1,358,644
10 Junik 69,553 92,263 98,293 53,249 88,150 93,561 122,802 180,413 191,855
11 Kaçanik 324,705 449,309 496,048 321,949 329,012 349,209 646,655 778,321 845,257
12 Kamenicë 339,325 471,356 522,019 461,134 430,901 457,352 800,459 902,257 979,371
13 Klinë 425,320 565,041 602,771 405,117 515,150 546,773 830,437 1,080,191 1,149,544
14 Leposaviq - 41,790 54,065 57,383 41,790 54,065 57,383
15 Lipjan 903,311 1,157,900 1,195,879 1,004,006 1,003,346 1,064,938 1,907,316 2,161,247 2,260,817
16 Malishevë 436,484 620,388 699,625 370,824 442,782 469,963 807,308 1,063,170 1,169,588
17 Mamusha 30,791 41,011 43,848 26,143 30,535 32,409 56,934 71,546 76,257
18 Mitrovicë 934,702 1,232,528 1,306,216 1,401,156 1,539,276 1,633,766 2,335,857 2,771,804 2,939,982
19 Novobërdë 102,934 142,657 157,696 120,002 121,040 128,470 222,936 263,697 286,166
20 Obiliq 400,477 520,932 545,355 549,703 552,010 585,896 950,180 1,072,942 1,131,250
21 Pejë 2,122,687 2,851,428 3,071,157 1,794,778 2,001,795 2,124,677 3,917,465 4,853,223 5,195,834
22 Podujevë 465,314 644,341 711,788 877,245 817,194 867,358 1,342,559 1,461,535 1,579,146
23 Prishtinë 7,775,089 10,043,605 10,447,681 20,496,857 20,614,904 21,880,373 28,271,947 30,658,509 32,328,054
24 Prizren 2,453,993 3,267,929 3,493,407 4,720,034 4,767,260 5,059,904 7,174,027 8,035,189 8,553,310
25 Rahovec 499,593 691,785 764,175 561,500 626,392 664,844 1,061,093 1,318,177 1,429,019
26 Shtërpcë 327,821 441,968 477,506 86,478 150,941 160,206 414,299 592,909 637,712
27 Shtime 227,910 328,856 375,149 362,622 315,621 334,996 590,532 644,477 710,145
28 Skenderaj 253,639 345,956 377,452 1,267,865 1,395,517 1,481,182 1,521,503 1,741,473 1,858,634
29 Suharekë 832,746 1,119,833 1,207,230 980,209 1,021,426 1,084,127 1,812,956 2,141,259 2,291,357
30 Viti 439,589 595,983 646,966 421,661 471,877 500,843 861,250 1,067,860 1,147,809
31 Vushtrri 744,577 982,644 1,042,164 1,162,326 1,323,247 1,404,476 1,906,903 2,305,891 2,446,639
32 Zubin Potok - 31,343 43,252 45,907 31,343 43,252 45,907
33 Zveçan - 36,566 48,658 51,645 36,566 48,658 51,645
34 Gracanicë 759,213 981,580 1,021,889 883,753 1,121,892 1,190,760 1,642,966 2,103,471 2,212,649
35 Kllokot 74,151 99,673 107,414 69,904 77,471 82,227 144,055 177,144 189,641
36 Mitrovica veriore - 62,685 75,690 80,337 62,685 75,690 80,337
37 Partesh 56,425 74,213 78,470 15,671 37,741 40,058 72,096 111,954 118,528
38 Ranillug 42,306 58,690 64,930 79,519 69,550 73,819 121,825 128,240 138,749
30,000,000 40,052,005 42,910,113 48,000,000 50,500,000 53,600,000 78,000,000 90,552,005 96,510,113 TOTAL
No. Municipality
Tax revenues Non tax revenues
Projections for
2021
Projections for
2022
Projections for
2023
Tax on
property and
land 2021
Tax on
property and
land 2022
Tax on
property and
land 2023
Years 2021 Years 2022 Years 2023
78
4.11. Investment clause
For year 2021 with the mechanism of the investment clause, the financing of projects in following
municipalities continues as follows:
1. Construction of Water Supply System for the Municipality of Istog, amounted to 1,673,122.37
euros.
2. Wastewater Removal System Project for the Municipality of Podujeva amounted to 1,125,298.26
euros.
3. Project for Construction of Drinking Water Supply System for the Municipality of Ferizaj
amounted to 2,723,503 euros.
4. Project for Construction of Water Supply System for the Municipality of Graçanica amounted to
1,066,287 euros,
5. Project for the Construction of Sewerage System for the Municipality of Shtime amounted to
793,562.24 euros.
4.12. Sumamry of municipal funding for 2021-2023
For the allocation of government grants by municipalities for 2021-2023, the basic criteria and principle
formulas stipulated in the Law on Local Government Finance and other relevant laws have been
implemented, as well as based on macro-fiscal projections and data from line ministries.
Table 16 Summary of municipal funding for 2021-2023 (mil. euro)
Description Year 2018 Year 2019 Year 2020 Year 2021Projections
for 2022
Projections
for 2023
1. Government grants 392.4 419.1 463.5 440.0 494.7 505.0
1.1 General grant 173.6 180.7 196.3 182.6 191.7 200.7
General grant 168.9 175.8 196.3 182.6 191.7 200.7
Contingency to the correction formula 4.7 4.9
1.2 Specific health grant 48.5 53.4 61.7 62.6 90.5 91.0
Basic grant 61.7 61.7
New policies 0.9
1.3 Specific education grant 170.3 185.0 205.6 194.8 212.5 213.3
Basic grant 205.6 192.0
New policies 2.8
2. Financing for secondary healthcare 2.6 2.6 2.6 2.6 2.6 2.6
3. Residential services 1.7 1.6 2.0 2.3 2.3 2.3
4. Financing for CPC, QKHFZ and KHM 0.1 0.1 0.1 0.1 0.07 0.07
5. Grant for the Capital - Prishtina 10.8 11.8 11.0 11.5 12.0
6. Financing for Obiliq 5.0 4.2 4.6 4.6 4.6
7. Municipal own-source revenues 82.0 87.0 83.1 78.0 90.55 96.51
8. Financing for theatres 0.9 0.9 0.9 0.9
9. Financing from borrowing 3.7 4.8 0 0 0 0
10. Funding from the Investment Clause 23.1 11.5 7.4 0 0
Total Municipal Financing 482.41 554.05 579.75 546.8 607.2 624.0
79
ANNEX 1 Tabela 1. Parashikimet Fiskale
Përshkrimi 2019 2020
Rishikim
2021
Proj.
2022
Proj.
2023
Proj.
në miliona Euro
1. Total Revenue 1,888.2 1,788.5 1,916.9 2,020.9 2,116.4
1.1 Tax Revenue 1,662.0 1,565.2 1,684.1 1,771.0 1,852.5
Direct Taxes 292.3 282.4 301.0 322.4 336.2
Tax on Corporate Income 94.6 89.8 97.4 101.3 104.1
Tax on Personal Income 165.6 159.6 168.9 176.1 184.1
Tax on Immovable Property 27.3 28.7 30.0 40.1 42.9
Other 4.8 4.4 4.7 4.9 5.1
Indirect Taxes 1,415.3 1,322.4 1,429.4 1,497.4 1,567.7
Value Added Tax: 845.6 790.5 873.3 915.6 959.5
Domestic: 239.2 238.1 262.7 270.3 275.3
Border: 606.4 552.4 610.6 645.4 684.2
Customs Duty 130.3 105.9 127.1 135.4 143.8
Excize 435.5 422.6 425.5 442.6 460.5
Other indirect 3.8 3.4 3.5 3.7 3.9
Tax Refunds -45.5 -39.6 -46.2 -48.8 -51.4
1.2 Non-tax revenue 214.6 188.9 222.3 239.4 253.4
Fees, charges, and other - Central Level 121.4 105.0 122.1 135.6 143.5
Fees, charges, and other - Local Level 50.0 47.1 48.0 50.5 53.6
Concessionary fees 11.1 2.7 19.0 20.1 23.1
Royalties 29.4 30.2 30.2 30.2 30.2
Interest income (KEC loan) 2.7 4.0 3.0 3.0 3.0
1.3 Budget support and grants 11.5 34.4 10.5 10.5 10.5
1.4 DDG - Donor designated grants 8.0 12.0 12.0 12.0 12.0
2. Total Expenditure 2,093.4 2,620.4 2,475.1 2,359.8 2,411.0
2.1 Recurrent Expenditure 1,538.8 1,860.5 1,781.1 1,647.1 1,654.7
Regular recurrent expenditure 1,538.8 1,649.2 1,633.1 1,647.1 1,654.7
Wages and Salaries 615.9 620.7 638.8 641.3 644.5
Goods and Services 295.6 315.4 335.1 346.3 346.7
Subsidies and Transfers 627.3 678.6 651.5 651.7 655.6
Reccurent reserves 0.0 34.4 7.8 7.8 7.8
Economic Recovery Program 0.0 364.6 217.0 0.0 0.0
2.2 Capital Expenditure 531.2 729.9 645.6 665.7 699.9
Regular budget financing 386.8 397.4 437.2 490.2 529.3
Debt financing through the investment clause 12.5 147.5 178.4 175.6 170.6
Liquidation proceeds 131.9 185.0 30.0 0.0 0.0
2.3 Public Debt Interest 23.5 30.0 48.3 46.9 56.4
3. Budget Balance (1-2) -205.3 -831.9 -558.2 -338.9 -294.6
4. Expenditure exempted from the fiscal rule: 177.0 380.7 214.4 181.6 176.6
Expenditure from dedicated PAK revenue/2 1.0 6.0 6.0 6.0 6.0
Expenditure financed from municipal carried-over OSR 30.7 42.2 0.0 0.0 0.0
Capital spending from the investment clause and liquidation p. 144.4 332.5 208.4 175.6 170.6
5. Budget Balance, as per fiscal rule definition (5+6) -28.2 -451.1 -343.7 -157.3 -118.0
A. Financing Need: -205.3 -831.9 -558.2 -338.9 -294.6
B. External Financing -6.0 320.8 262.2 204.9 186.7
On-budget lending (IMF Drawings) 0.0 152.0 95.0 60.0 60.0 Regular on-budget project-loans 20.6 78.2 39.5 21.3 8.4
Investment clause project-loans 12.5 147.5 178.4 175.6 170.6 POE on-lending receipts (gross) 12.1 47.6 58.6 23.7 15.2 Principal repayment 51.2 104.5 109.4 75.7 67.6
C. Internal Financing 262.8 367.2 158.7 143.7 152.2
Issuance of treasury bills 115.3 170.2 170.0 150.0 150.0
Rapayment of POE debts 10.9 11.4 11.4 11.4 11.4
Liquidation/privatization proceeds 150.0 185.0 30.0 0.0 0.0
One-off finaicning (KPST) 0.0 0.0 0.0 0.0 0.0
Use of carried-forward municipal OSR -6.3 42.2 0.0 0.0 0.0
Use of dedicated PAK revenue 5.6 6.0 6.0 6.0 6.0
POE lending outlays 0.0 0.0 0.0 0.0 0.0
POE on-lending outlays (gross) 12.7 47.6 58.6 23.7 15.2
D. Change in usable bank balance: 51.5 -143.9 -137.3 9.7 44.3
E. Stock of Usable Bank Balance 356.5 213.3 234.6 244.3 288.6
Memo 1:
80
Revenues received from TAK 504.3 491.8 533.7 552.6 568.5
Revenues received from Customs 1,179.6 1,084.3 1,166.7 1,227.1 1,292.4
GDP 7,114.3 6,961.3 7,149.4 7,506.9 7,941.8
Budget deficit (fiscal rule def.) as percentof GDP -0.4% -6.5% -4.8% -2.1% -1.5%
Available bank balance as percentof GDP 5.0% 3.1% 3.3% 3.3% 3.6%
Memo 2:
Disclosure of the Economic Recovery Program 365 217.0
[1] Wages and salaries 14 0.0
[1] Goods and Services 13 17.0
[1] Subsidies and Transfers 111 77.0
[1] Support for municipalities 9.0
[2] Contingency for subsidies and transfers 74 45.0
[2] Capital contingency from Liquidation Funds (PAK) 100 30.0
[2] Capital Expenditures through Investment Clause and Borrowings 53 39.0
Memo 3:
Stock of Domestic Debt 792.1 962.3 1,132.3 1,282.3 1,432.3
Stock of Foreign Debt (+guarantees) 409.1 719.7 890.5 1,084.5 1,260.5
State guarantees 44.0 41.7 40.6 39.6 38.6
Debt as percentof GDP 17.5% 24.8% 28.9% 32.1% 34.4%
Tabela 1.1 Financimi i Bilancit Buxhetor
Pershkrimi 2019 2020
Rishikim
2021
Proj.
2022
Proj.
2023
Proj.
në miliona Euro
Budget Revenues 1,888 1,788 1,916.9 2,020.9 2,116.4
Budget Expenditure 2,093 2,620 2,475.1 2,359.8 2,411.0
1. FINANCING NEEDS -205 -832 -558.2 -338.9 -294.6
2. Net external financing -6 321 262.2 204.9 186.7
2.1. Inflows: 45 425 361.0 269.7 243.6
IMF - 152 95.0 60.0 60.0
On-lending 12 48 58.6 23.7 15.2
Withdrawals from creditors 4 37 48.0 12.8 4.6
Receipts from public lending entities 8 10 10.6 10.9 10.6
Draft loans 33 226 217.9 196.9 179.0
IFI financing as per the investment clause 13 148 178.4 175.6 170.6
IFI project-loans 21 78 39.5 21.3 8.4
2.2. Outflows: 51 105 109.4 75.7 67.6
Debt principal repayments 51 105 109.4 75.7 67.6
3. Net domestic financing 263 367 158.7 143.7 152.2
3.1. Inflows: 526 615 379.4 372.4 437.4
Domestic borrowing: new debt issuance 115 170 170.0 150.0 150.0
Refinancing of treasury bills 245 200 162.0 205.0 270.0
Loans to POEs (principal) 11 11 11.4 11.4 11.4
One-off financing (PAK) 150 185 30.0 - -
Inflows from designated funds 6 6 6.0 6.0 6.0
Inflows from funds (FS2, FS3) - 42 - - -
3.2. Outflows: 264 247 220.6 228.7 285.2
Loans to POEs (principal) - 0 - - -
On-lending 13 48 58.6 23.7 15.2
Outflows from debt service 9 37 48.0 12.8 4.6
Outflows from on lending 4 10 10.6 10.9 10.6
Outflows from isuance of treasury bills 245 200 162.0 205.0 270.0
Outflows from funds (FS2, FS3, increase) 6 0 - - -
4. CHANGES IN BANK BALANCE (Undesignated) 52 -144 -137.3 9.7 44.3
5. END-YEAR NET BANK BALANCE 357 213 234.6 244.3 288.6
off which : ELA 46 46 46.0 46.0 46.0
6. Designated Funds 97 47 46.9 46.9 46.9
Stock of donor designated grants 9 8 8.0 8.0 8.0
81
Stock of carried-over OSR (Central level) 6 3 3.0 3.0 3.0
Stock of carried-over OSR (Local level) 49 12 12.0 12.0 12.0
The development trust 8 6 6.0 6.0 6.0
Designated revenue 1 1 0.5 0.5 0.5
Other 18 17 17.4 17.4 17.4
Unspent funds from borrowing 7 0 - - -
7. END-YEAR GROSS BANK BALANCE 454 260 281.5 291.2 335.5
8. CHANGE in BANK BALANCE 66 -194 -137.3 9.7 44.3
Memo
Stock of Domestic Debt 792 962 1,132.3 1,282.3 1,432.3
Stock of Foreign Debt 409 720 890.5 1,084.5 1,260.5
State guarantees 44 42 40.6 39.6 38.6
Interest expenditure as percentof GDP 0.4% 0.4% 0.6% 0.6% 0.7%
Table 2: Nominal GDP and its components, mil eur
Description 2019 est
2020 Proj.
2021 Proj.
2022 Proj.
2023 Proj.
Mil eur
Consumption 7,037 7,027 7,377 7,691 8,074
Private Consumption 6,011 5,943 6,280 6,571 6,901
Public Consumption 996 1,054 1,066 1,089 1,143
General Government 868 922 932 953 1,003
Donors 128 132 134 137 140
NPISH 30 31 31 31 31
Investment 2,098 1,700 2,006 2,185 2,394
Private Investment 1,567 1,245 1,457 1,573 1,697
Public Investment 531 455 549 613 698
Net Export of Goods and Services -2,021 -2,014 -2,233 -2,370 -2,527
Exports 1,898 1,517 1,657 1,755 1,859
Exports of goods 393 422 442 464 487
Exports of services 1,505 1,095 1,215 1,291 1,372
Imports 3,919 3,531 3,891 4,125 4,386
Imports of Goods 3,253 2,992 3,280 3,466 3,674
Imports of Services 666 539 611 659 711
GDP 7,114 6,713 7,149 7,507 7,942
Other Indicators
Private sector disposable income in mln
Eur
7,212
7,032
7,074
7,453
8,034
Private Consumption to GDP 84% 89% 88% 88% 87%
Private Investment to GDP 22% 19% 20% 21% 21%
Exports to GDP 27% 23% 23% 23% 23%
Imports to GDP 55% 53% 54% 55% 55%
82
Investment Clause
The Government of Kosovo identified the need for extra space for financing major capital
projects and in 2015 started the negotiations for a third IMF program, which, among other things,
would allow the relaxation of the fiscal rule. In other words, for large capital projects of strategic
importance, the Government would be able to enter into debt beyond the fiscal rule of 2percentof
Gross Domestic Product (GDP) for a period of 10 years, with the main condition that it does not
exceed 30percentof the total debt of the country. This would enable the Government of Kosovo
to have an additional fiscal space of approximately 1.8percentover the 2percentstipulated by the
fiscal rule, in order to obtain more financing for capital projects of public importance. This was
recognized as the ”investment clause” amendment which introduced the approval of the
necessary legislative amendments by the Assembly in January 2016, through the amendment of
the Law on Public Financial Management and Accountabilities, which includes the fiscal rule
as well.
The Government of Kosovo remains committed to include, in a balancing manner, in the budget
the process of capital projects implemented through the ”investment clause”, so that the analysis
of funding of such projects is based on the analysis of the long-term sustainability of public debt.
Another condition provided by the provisions of the investment clause is that the Ministry of
Finance përpares, twice a year, a narrative report on the implementation of projects under this
provision.
The reports to be prepared in 2020 will include the following projects which are part of the
budget tables for 2020. It is worth highlighting that the inclusion of projects in the investment
clause is realized based on their maturity for implementation in 2020. Projects that are included
in the investment clause are shortly summarized as follows:
Rehabilitation of Railway Route 10– The implementing institution for this project is the Public
Enterprise “Infrakos” Prishtina. The total cost of the project is expected to be aaproximately
194.5 million Euros. The EBRD and the EIB fund half of it, whereas the European Union funds
the other half of the project. Financial agreements with EBRD and EIB have been signed and
ratified. With regard to the EU contribution, the first and second grant agreements have already
been signed and ratified. Civil works for phase 1 started in early 2019, while for works for phase
2 are expected to begin in 2020. Tender and procurement procedures for phase 3 are expected
to begin in late 2020, whereas works are expected to begin in 2021 and be completed in 2024.
The first disbursement of loans and grant agreement was realized during 2019, and due to
implementation delays, amendments to the agreements signed in 2015 must be made.
Rehabilitation of Ibër-Lepenc – The implementing institution for this project is the Public
Enterprise "Iber Lepenci" and the estimated cost of the project is 25 million Euros. The financial
agreement between the Republic of Kosovo and the World Bank was ratified in 2017, whereas
the first disbursement was made in January 2018.
83
Rehabilitation of Regional Roads - the implementing institution for this project is the Ministry
of Infrastructure and Environment (former Ministry of Infrastructure). The financial agreement
has been signed and ratified, and the project is worth 29 million Euros, with funding from the
EBRD. Fieldwork will begin during 2020 and expected to be completed in 2021.
Construction of Motorway N9 Pristina - Pejë (SEETO Route 6 A) Segment Kijeve-Klina to
Zahaq - the implementing institution for this project is the Ministry of Infrastructure and 89
Environment (former Ministry of Infrastructure). The cost of the project is 193 million Euros.
The Loan Agreement with the EBRD was signed in 2017 and with EIB in the second half of
2018. In January 2019, an agrement of 1 million Euros was signed between the Republic of
Kosovo and the EIB as part of the Economic Resilience Initiative for support during
implementation. Civil works have been delayed due to changes in implementation, as requested
by the line ministry, by dividing the project into 3 lots. By changing the leadership of the Project
Implementation Unit, implementation could be accelerated.
Project for Competitiveness and Export Readiness - The implementing institution for this
project is the Ministry of Economy, Lavor, Trade, Industry, Entrepreneurship, and Strategic
Investments (former Ministry of Trade and Industry and the Ministry of Labor and Social
Welfare). The 14.3 million Euro project is funded by the World Bank and the first disbursement
was made in March 2019.
Additional financing for the project of agriculture and rural development – The agreement on
this project was signed with the International Development Agency - World Bank, in 2017, and
has already been ratified by the Assembly. The estimated cost of the project is 20.8 million
Euros and the first disbursement was made in March 2019.
Treatment of wastewater in Pristina (construction of waste water treatment plant in Prishtina
region) – The Ministry of Infrastructure and Environment (former Ministry of Environment and
Spatial Planning) is the implementing institution of this project. Funding of the project will be
provided through a framework agreement between the Government of the Republic of Kosovo
and the Government of the Republic of France, which was ratified during 2017. Based on the
agreement, the project is worth 86 million Euros. Implementation is expected to begin in the
second quarter of 2020.
Construction of Pristina Ring Road – The implementing institution for this project is the
Municipality of Prishtina. The project is being evaluated by Banks, EBRD and EIB. The civil
works are expected to start in 2022, as the study of the project which is being funded by the
EBRD has not been finalized yet.
Kosovo Digital Economy (KODE) – The Ministry of Economy, Lavor, Trade, Industry,
Entrepreneurship, and Strategic Investments (former Ministry of Economic Development) is the
implementing institution for this project. The estimated value of the project is 25 million US
84
dollars, which will be potentially funded by the World Bank. The first disbursement was made
in November 2019.
Construction of wastewater treatment plants in Mitrovica – Mitrovica Regional Water
Company is the implementing institution for this project. The project is under assessment carried
by the EBRD (as the main financial institution) and the EIB, which will fund the project together,
whereas will be supported by a grant from the Western Balkans Investment Framework (WBIF).
Following the signing and ratification of the agreements, implementation is expected to begin
in 2020.
Wastewater Treatment Development Project in Gjilan – Gjilan/Hidromorava regional water
company is the implementing institution for this project, which has a projected value of 23
million euros, which will be funded by the EBRD and the EIB. The 10 million Euros financial
agreement with the EBRD was signed in May 2019 - and is awaiting ratification, while the 11
million Euros agreement with the EIB will be signed in mid-2020 as delays in the stabilizing of
institutions and due to the pandemic Covid-19 have postponed the planned signing for March
2020. The project is expected to be implemented during the period 2021- 2024.
Project for wastewater treatment in Podujeva municipality – Podujeva municipality is the
implementing institution of this project, which has a value provided by 5.4 million Euros. The
financial agreement was signed with UniCredit Bank Austria AG, on behalf of the Ministry of
Finance of Austria. The agreement was ratified and became effective in June 2019. During 2019,
about 2.4 million Euros were disbursed, whereas by mid-April 2020, another 548 thousand were
disbursed. The last disbursement for this project is expected to take place at the end of October
2020.
Construction of a Water Supply System in the Municipality of Ferizaj – The Municipality of
Ferizaj is the implementing institution for this project, with a total estimated value of 5.1 million
Euros. The financial agreement was signed in November 2018 with Raiffeisen Bank
International, which operates on behalf of the Ministry of Finance of Austria. The agreement
was ratified and became effective in June 2019. During 2019, approximately 1,025 million
Euros were disbursed, whereas by the mid-April 2020 approximately another 485 thousand were
disbursed. At the end of June 2021, the last disbursement for this project is expected to be
completed.
Construction of a Water Supply System in the Municipality of Istogu – The Municipality of
Istog is the implementing institution for this project, with a total estimated cost of 5.1 million
euros. The financial agreement was signed in November 2018 with UniCredit Bank Austria AG,
which operates on behalf of Ministry of Finance of Austria. The agreement was ratified and
became effective in June 2019. During the same year 1,018 million Euros were disbursed,
whereas by mid-April 2020 another 548 thousand were disbursed. The last disbursement for this
project is expected to be completed by the end of March 2021.
85
The Project for Treatment of Wastewater in the Municipality of Shtime -Shtime Municipality
is the implementing institution for this project, with a total estimated cost of 2.4 million Eur.
The financial agreement was signed in November 2018 with UniCredit Bank Austria AG, which
operates on behalf of the Austrian Ministry of Finance. The agreement was ratified and became
effective in June 2019. During 2019, approximately 1.4 million Euro were disbursed, while by
the middle of April 2020, 46,192.38 were disbursed. The last disbursement for this project is
expected to take place at the end of June 2020.
Construction of a Water Supply Scheme in the Municipality of Gracanica-The Municipality
of Gracanica is the implementing institution for this project, with a total estimated cost of 5.1
million euros. The financial agreement was signed in November 2018 with UniCredit Bank
Austria AG, which operates on behalf of the Ministry of Finance of Austria. The agreement was
ratified and became effective in June 2019. Also, during this year 1.48 million Euros were
disbursed, while by the mid-April 2020 another 315 thousand were disbursed. The last
disbursement for this project is expected to take place at the end of March 2021.
Real Estate Cadaster and Geospatial Infrastructure Project (REGIP) - the implementing
institution of this project is the Kosovo Cadastre Agency. The total project cost estimate is US
$ 16.5 million. The Financing Agreement (FA) between the Government of Kosovo and the
International Development Association (IDA WB) was signed in February 2019. The
implementation of the project is expected to begin in 2020.
Public Transport Project, Municipality of Prishtina - Public Enterprise of Prishtina ‘Trafiku
Urban’ is the implementing institution for this project, which has a total estimated 91 cost of 10
million Euros. The project is funded by the EBRD and its implementation began in 2016.
Replacement of Asbestos-Cement Pipes in the Municipality of Gjakova - Replacement of
asbestos water supply pipe lines - cement material, which were installed 55 years ago, in the city
of Gjakova. This investment will meet the need to support the supply of drinking water from the
tap for the next 30 years. The implementation agency is the Municipality of Gjakova. The project
has been approved by the National Investment Committee (NIC) to be funded through the
Agreement between the Government of the Republic of Kosovo and the Government of Hungary
on the Establishment of the Framework Program for Financial Cooperation (Law No. 05 / L-
153). Negotiations of the Financing Agreement are subject to the procedures of Law no. 05 / L-
153.
Wastewater Treatment Plant in the Municipality of Ferizaj - This project includes the design,
construction and maintenance of collection systems (Wastewater Treatment Plant) in the
Municipality of Ferizaj. This project will be implemented by the Municipality of Ferizaj. The
project has been approved by the National Investment Committee (NIC) to be funded through
the Agreement between the Government of the Republic of Kosovo and the Government of
Hungary on the Establishment of the Framework Program for Financial Cooperation (Law No.
86
05 / L-153). Negotiations of the Financing Agreement are subject to the procedures of Law no.
05 / L-153.
Sewerage system in the Municipality of Deçan - Zone 1: Sewerage system for Strellc village.
Zone 2: Sewer system for Dubovik village and part of Isniq village. Area 3: Sewerage of
Lëbushë, Isniq and Prapaqan villages. This project will be implemented by the Municipality of
Deçan. The project has been approved by the National Investment Committee (NIC) to be
funded through the Agreement between the Government of the Republic of Kosovo and the
Government of Hungary on the Establishment of the Framework Program for Financial
Cooperation (Law No. 05 / L-153). Negotiations of the Financing Agreement are subject to
procedures according to Law no. 05 / L-153.
Drinking water reservoir in the village of Verboc / Municipality of Drenas - Construction of
a drinking water collector / from the tap in the village of Verboc, which will provide drinking
water supply in the municipality of Drenas. This project will be implemented by the
Municipality of Drenas. The project has been approved by the National Investment Committee
(NIC) to be funded through the Agreement between the Government of the Republic of Kosovo
and the Government of Hungary on the Establishment of the Framework Program for Financial
Cooperation (Law No. 05 / L-153). Negotiations of the Financing Agreement are subject to
procedures according to Law no. 05 / L-153. In the Law on Budget of 2020, the following
projects are planned to be reflected through the Investment Clause in the medium term:
Construction of the Highway, section E from Besi to Merdare (Road 7 SEETO) - the
implementing institution for this project is the Ministry of Infrastructure and Environment (
former Ministry of Infrastructure). The project has a total estimated cost of 240 million Euros
and will be potentially funded by EBRD, EIB and the Government of Kosovo. The project has
been identified as a priority project by the National Investment Committee and is part of the
Priority List of Projects under the transport sector as it is part of the pan- European corridors of
the TEN-T network. So far, the European Union has supported the project with over 6 million
euros for feasibility studies and separate funding to supervise the works. As a result of support
from the Ministry of Finance, this project is suitable for investment grants through the Western
Balkans Investment Framework (WBIF). The application for the investment grant, prepared
with the support of the Ministry of Finance to the Ministry of Infrastructure and Environment,
for a grant of 20percentof the total value of the works is being reviewed by the WBIF, and the
preliminary response is expected to be provided during the summer of 2020.
Project for the purchase of equipment and renovation of tertiary and secondary health care
hospitals - This project is part of two studies requested by WBIF, where the first was to identify
the needs for equipment, while the study for improvement of health infrastructure has not started
yet. Projects arising from these two studies will radically transform the health system in the
country. The COVID-19 pandemic situation has made healthcare a priority since during the
curfew period, the country should create capacities that would enable easier coping with the
87
situation at the moment when the gradual reopening of the economy will begin. Therefore,
during review it is expected that funding will be approved by the Development Bank of the
Council of Europe and the World Bank to combat the situation and through which the projects
for the purchase of equipment and renovation of hospitals will continue.
Establishment of e-Testing Centers and further enhancement of e-Education services for pre-
university education in Kosovo-This project is run by the Ministry of Education, Science and
Technology and is financed with a loan through the Austrian Soft Credit Program, with a value
of 4.9 million Eur.
Prishtina-Mitrovica Highway Project (Phase 2) - The aim of the project is to connect the
capital city of Prishtina with the cities of Vushtrri and Mitrovica through the construction and
rehabilitation of the second main road (M2) and transform it from a one-lane road on each side
to high-speed two-lane roads on each side. The project will be funded by a loan from the Saudi
Development Fund, in the amount of 12.8 million Euros and will be managed by the Ministry
of Infrastructure and Transport.
Development of the Industrial Zone of Drenas - The area will be developed in a high quality
business center in an area of 37 ha, in front of the Industrial Park of Drenas now fully occupied.
The project will be funded by a loan from the European Bank for Reconstruction and
Development, with a value of 12.8 million euros, and will be managed by the Ministry of Trade
and Industry.
88
ANNEX 2
89
Table 2: Main deviations betweem MTEF 2020- 2022 dhe 2021- 2023 for year 2021
viti 2021 MTEF 2020-2022
MTEF2021-2023
Deviations
Recent MTEF to Actuals
Recent MTEFs to Actuals
% mln Eur
Total Revenues 2159 1916.9 -11.2% -242.1
of which
Excise 511 425.5 -16.7% -85.5
1) negative economic growth in 2020 has led to a lower level of revenues from excise in the base year 2020, which is used to estiamte the revnues for the comign years. 2) higher economic growth in 2021 compared to that in the previous MTEF had a positive effect, neverhtless the base effect had a higher impact leading to a lower level in mln eur.
Customs Duties 142 127.1 -10.5% -14.9
1) base effect as a result of a significant drop in import of goods in 2020, made year 2021 have a lower level of revenues from custom duties 2) despite a higher growth of imports in 2021 comapred to previous MTEF, the base effect has been more significant.
Border VAT 716 610.6 -14.7% -105.4
1) base effect as a result of a significant drop in import of goods in 2020, made year 2021 have a lower level of revenues from border VAT. 2) despite a higher growht of imports in 2021 comapred to previous MTEF, the base effect has been more significant.
Domestic VAT 273 262.7 -3.8% -10.3
1) base effect as a result of a significant drop in ithe tax base in 2020, made year 2021 have a lower level of revenues . 2) Government decision to lower VAT rate for some categories of products as part of the Economic Recovery Program (-3.4 mln)
Direct Taxes 327 301 -8.0% -26 1) base effect as a result of a significant drop in the tax base in 2020, made year 2021 have a lower level of revenues from CIT and PIT
Total Expenditure 2535 2775.1 9.5% 240.1
of which
Wages and Salaries 691 638.8 -7.6% -52.2
1) in accordance with LPFM, the wage bill is increased up to a maximum of nominal economic growth two years ago, but in this year a smaller increase is projecteed due to it being significant to cover all the needs. 2) Also, expenses planned in 2020 are lower than in the previous MTEF, which has made the base lower than before..
90
Goods and Services 357 335.2 -6.1% -21.8 1) the main difference compared to the previous MTEF comes from the need to conduct sacings in order to accomodate spending that is part of the Recovery Program
Subsidies and Transfers 630 651.4 3.4% 21.4 1) The current spending level has adressed all the needs to cover social schemes.
Capital Expenditure 825 665.7 -19.3% -159.3
1) The fall in this category has been primarily due to the LPFM regarding the deficit limit in 2020 that has been temporarily breached. 2) Also, some projects from the investment clause have been revised due to the execution plans.
Current Spending for the Economic Recovery Program
0 148 / 148
Interest Payments 28 48.3 72.5% 20.3
1) Increased emissions 30 mln Eur more than in the previous MTEF for 2020 2) Revisions in the structure of both domestic and foreign debt.
Table 3: Main deviations betweem MTEF 2020- 2022 dhe 2021- 2023 for year 2022
2022 MTEF 2020-2022
MTEF2021-2023
Deviations Recent MTEF to Actuals
Recent MTEF to Actuals
% mln Eur
Total Revenues 2276 2020.9 -11.2% -255.1
of which
Excise 533 442 -17.1% -91
1) lower revenues from excise in 2021, which is used to estiamte the revenues for the comign years. 2) despite an increase in tobaco excise (+6.1 mln), the reduction of excise in juices is estimated to have a negative impact (-10 mln)
Custom Duties 152 135.4 -10.9% -16.6 1) Lower level of revenues in 2021 which is used a base ; 2) despite a higher growth of imports in 2021 compared to previous MTEF, the base effect has been more significant.
Border VAT 760 645.4 -15.1% -114.6 1) Lower level of revenues in 2021 which is used a base 2) despite a higher growth of imports in 2021 compared to previous MTEF, the base effect has been more significant.
Direct Taxes 347 322.4 -7.1% -24.6 1) the base effect as a result of the significant drop in the tax base for CIT and PIT in 2020 made the revenues in 2021 be lower. Thus, the base effect influenced revenues in 2022 too.
Non Tax Revenues 233 239.4 2.7% 6.4
1) Non-tax revenues are mainly higher due to a more dynamic implementation of the process of legalization of illegal constructions and improved compliance with vehicle registration. Another important factor in this increase is the postponement of concession tax payments for 2020
91
Domestic VAT 288 270.3 -6.1% -17.7 1)Lower level of revenues in 2021 which is used a base
Total Expenditure 2603 2359.8 -9.3% -243.2
of which
Wages and Salaries 730 641.3 -12.2% -88.7
1) in accordance with LPFM, the wage bill is increased up to a maximum of nominal economic growth two years ago,n which in the previous MTEF was 5.6percentwhereas in the latest MTEF is negative. 2) Expenditure in 2021 are lower (by 52 mil Eur)and has made the base on which you apply the growht rate lower than in the previous MTEF.
Goods and Services 360 346.3 -3.8% -13.7 1) In this category, the main change with the planning in the previous MTEF comes as a result of the need for savings in order to return the deficit to the levels set by the LPFM, after allowing a temporary overrun.
Capital Expenditure 846 665.7 -21.3% -180.3
1) The fall in this category has been primarily due to the LPFM regarding the deficit limit in 2020 that has been temporarily breached. 2) Also, some projects from the investment clause have been revised due to the execution plans.
Subsidies and Transfers 633 651.7 3.0% 18.7 1) The current spending level has adressed all the needs to cover social schemes.
Interest Payments 30 46.9 56.3% 16.9 1) Increased emissions 30 mln Eur more than in the previous MTEF for 2020 2) Revisions in the structure of both domestic and foreign debt.