Republika e Kosovës

Republika Kosova - Republic of Kosovo Qeveria –Vlada-Government

Zyra e Kryeministrit - Ured Premijera - Office of the Prime Minister

Strategy for Improving

Policy Planning and Coordination in Kosovo 2016-2018

Pristine, May 2015

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Contents A. Executive Summary ................................................................................................... 4

B. Case for Reform ......................................................................................................... 6

C. Components of an Improved Planning System .......................................................... 9

1. Improvement of Strategic Planning Framework .................................................... 9

1.1 National Development Strategy ...................................................................... 9

1.2 Consolidation of Sector Strategies Framework ............................................ 10

1.3 Actions ......................................................................................................... 11

2. Improvement of Strategic Decision-Making Process ......................................... 12

2.1 Actions ......................................................................................................... 14

3. Process Integration - Integrated Planning Calendar ............................................. 15

3.1 Actions ............................................................................................................. 15

4. European Integration Planning .............................................................................. 16

4.1 Actions ............................................................................................................. 16

5. Medium-Term Expenditures Framework / Annual Budget..................................... 17

5.1 Actions ............................................................................................................. 18

6. Public Investment Programming ........................................................................... 19

6.1 Actions ............................................................................................................. 20

7. External Assistance Management ......................................................................... 21

7.1 Actions ............................................................................................................. 23

8. Integrated Monitoring - Accountability and Delivery .............................................. 24

8.1 Actions ............................................................................................................. 25

ANNEX – IPS IMPLEMENTATION CALENDAR .......................................................... 27

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List of Abbreviations

BDMS Budget Development and Management System

DU Delivery Unit

EA External Assistance

EI European Integration

FBAC Fiscal and Budget Affairs Committee

GCS Government Coordination Secretariat

GP Government Programme

GPMC Government Planning Modernization Committee

GWAP Government Annual Work Programme

IPS Integrated Planning System

IPSIS IPS Information System

LO Legal Office

MEI Ministry of European Integration

MoF Ministry of Finance

MTEF Medium-Term Expenditures Framework

NDS National Development Strategy

NPAA National Plan for the Adoption of the Acquis

OPM Office of Prime Minister

PI Public Investment

PIC Public Investment Committee

PIP Public Investment Programme

SAAIP Stabilization and Association Agreement Implementation

SMG Strategic Management Group

SPC Strategic Planning Committee

SPO Strategic Planning Office

SPSG Strategic Planning Steering Group

SS Sector Strategies

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A. Executive Summary The Kosovo institutions are aware of the fact that despite of the significant progress made over the past decade, the current technical state of the core planning processes falls short of the necessary standards. With the given tight fiscal and economic situation, and the process of EU integration for Kosovo becoming more demanding, a more effective planning becomes eminent. Improvement of the planning and coordination system proposed under this strategy (under the adoption of the so called Integrated Planning System) focuses on the technical redesign of the Government’s core policy and financial planning processes. The fundamental assumption of these changes is that the quality and coherence of these technical processes significantly affect the Government’s ability to achieve our policy goals and keep the promises made to the Kosovo public. The primary purpose of improving the planning system in Kosovo is to avoid fragmentation and duplication between the government’s core policy and financial planning processes. Main focus of improvements will be on two core frameworks that should cover all government organizations planning processes:

Strategic Planning Framework: The National Development Strategy (NDS); and Sector Strategies establish the government’s strategic framework, medium to longer term goals and strategies for all sectors; and

Budget Planning Framework: the Medium-Term Expenditures Framework (MTEF), which requires each ministry to develop a 3-year plan to deliver outputs to achieve its policy objectives and goals within the ministry’s expenditure ceiling as set out in the government’s fiscal plan.

In addition, there are five core processes (components of IPS) are addressed, that affect a wide range of government planning activities and must be fully reflected in the strategic planning framework and METF. The document is built on the following components / objectives for improving policy planning and coordination in Kosovo

(i) Strategic Planning Framework (ii) High Level Decision Making Process (iii) Integrated Calendar (Process Integration) (iv) MTEF/Annual Budget Planning (v) European Integration (vi) Public Investment1 (vii) External Assistance (viii) Integrated Monitoring

The cornerstones for an improved planning architecture already exist in Kosovo. Therefore, the challenge is not one of building a new system from the ground up, but of reshaping, harmonizing, and connecting existing, but de-linked fragmented processes.

1 This refers to Kosovo’s Public Investment Programme (PIP). Technically, public investment is simply a component

of public expenditure and is managed within the MTEF/Annual Budget process. It is addressed separately here as it requires a distinct identification and appraisal process that needs significant improvement to be properly linked to decision making in the framework of the METF/Annual Budget planning process.

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In sum, this strategy (based on the, so called, proposal for establishing an Integrated Planning System in Kosovo) does not propose neither a new nor separate planning system. Nor is it an attempt to amalgamate existing processes within a single process. What this Strategy provides is a set of operating principles and supporting structures to ensure that government planning and monitoring as a whole takes place in an efficient, integrated and harmonized way.

Given the relatively early stage of institutional reform in Kosovo, there is certainly time to address issues related to improvement of policy planning and coordination. Kosovo institutions are aware of the fact that if action is not taken now, these problems could, in few years, become impeding as Kosovo’s ambitious EU integration reforms accelerate further. Implementation of this Strategy will occur in three stages from 2015-2018.

2015: The focus will be on planning process architecture, strengthening and capacity building of central institutions, OPM, MoF, and MEI. In line ministries, emphasis in the first year will be placed on establishing oversight structures, expanding ministry awareness of the new/improved planning system (IPS).

2016-2017: The focus will be on full implementation of the IPS processes in all line ministries, with emphasis placed on strengthening coordination and decision making structures, as well increasing ministry planning capacity.

2018 onward: The focus will be on the quality of implementation, with emphasis placed on strengthening accountability mechanisms and increasing ministry service delivery capacity.

The document is organized into three parts; the first chapter sets the context for improving the planning architecture in Kosovo through introducing the IPS; the second part outlines the proposed implications for each individual component of the improved planning architecture; the third presents summary of the calendar of actions for implementing the IPS in Kosovo over the period 2015-2018 Finally, Kosovo Government is aware of the fact that establishing an integrated planning and monitoring system in Kosovo cannot be achieved by simply “quick fix” solutions. Implementation and operationalization of the system will, objectively, take time and involve, apart from structural adjustments, management and administrative cultural changes. This process will benefit from a full political support of highest levels of Government, Prime Minister and his Cabinet. In this respect, Kosovo institutions have a lot to learn from experience of other accession or transition countries that went through the same processes not long ago. Many of the recent EU accession countries encountered similar problems at the initial stages in their path to EU membership. Some countries that have established functioning integrating planning systems such as Lithuania, Slovenia, Albania, could offer a good model to Kosovo given that size and institutional development experience of these countries are not much different from Kosovo.

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B. Case for Reform Kosovo Government is aware of the fact that improving policy planning coordination remains a challenge for Kosovo institutions on the way of preparing the country for further progress toward European Integration. There is a need to achieve better alignment between policies, particularly new policy priorities, and the budget. Different planning and budget framework are normally the responsibility of different government organizations, while the existing formal mechanism that ensures a good coordination and integration of all of these processes needs to be improved. To address this, a concerted action of the OPM structure, MoF and MEI is initiated to come to an agreement on how the main instruments for aligning policies and budgets could to be improved. The Kosovo institutions are aware of the fact that despite of the significant progress made over the past decade, the current technical state of the core planning processes falls short of the necessary standards. With the given tight fiscal and economic situation, and the process of EU integration for Kosovo becoming more demanding, a more effective planning becomes eminent. Actions proposed under this Strategy focuses on the technical redesign of the Government’s core policy and financial planning processes. The fundamental assumption of these changes is that the quality and coherence of these technical processes significantly affect the Government’s ability to achieve our policy goals/objectives and keep the promises made to the Kosovo public. Against this context, the Government of Kosovo has already taken steps to address this need. An ambitious agenda for improving policy planning and coordination is presented in the “the Road Map for establishing and implementing an Integrated a Planning System (IPS) in Kosovo”. The Road Map defines the steps for Kosovo central institutions to integrate the fragmented policy and financial planning systems and a related program of capacity building. The primary purpose of improving the planning system in Kosovo is to avoid fragmentation and duplication between the government’s core policy and financial planning processes. The table below illustrates our intentions on how the planning system will change the way in which processes are delivered and the way central institutions interact with ministries.

Pre-IPS Post-IPS

Prime Minister and Government involved late in the strategic planning and decision making process

PM and other decision makers will be more actively engaged at the outset rather than the conclusion of the planning process

No overarching national development vision

National Development Strategy will create a policy-driven system that supports long-term national goals and strategic priority options;

Too many sector strategies resulting in inflation of priorities

Consolidated strategic framework of sector and cross sector strategies guided by NDS

Sector strategies and European Integration documents policy objectives not properly reflected in MTEF

A harmonised “programme structure” introduced in METF/Annual budget and mutually consistent

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with sector strategies, reflecting the EI agenda requirements

Minimal working relationship between OPM / MoF / MEI

Strategic Planning Steering Group will be important for IPS Coordination and will actively coordinate OPM offices, MoF and MEI.

Unclear decision making processes of line ministries.

Within each ministry, a single standing management group, led by the Minister and comprising all senior management (heads of programmes), will oversee and monitor the implementation of all core policy and financial planning processes

Non coordinated planning calendar, and deadlines

An Integrated Planning Calendar will be issued at the beginning of each year covering the major requirements and deadlines for all core policy and financial processes and decision making milestones where PM`s and Government is involved

The government’s external assistance priorities are not clearly defined

A single external assistance pipeline document will be produced that identifies all priority areas for external assistance needs

Each core process established its own monitoring and reporting systems.

A single Government Work Monitoring Plan will be negotiated annually with each ministry encompassing all key outputs and indicators to be monitored by the centre

separate training programs were provided for each core process

combined training programs will be delivered wherever feasible

A Strategic Planning Committee led by the Prime Minister will be the structure on the top of IPS architecture. Essentially, the Strategic Planning Committee would be responsible for guiding the policy and planning process prior to final Government decisions. The Public Administration Reform Council (composed by high level officials) will guide the design, restructuring implications be responsible for implementation of the system itself. At line ministries level IPS implementation will be the responsibility of each Minister. The ministry’s senior management will form a Strategic Management Group to assure the quality and monitor the implementation the new planning system. The group will be led by the Minister (on the Deputy Minister in his/her behalf), coordinated by the General Secretary and comprise key Departmental Directors. The following sections outline the process improvements in each of the components of Integrated Planning System

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KOSOVO’S PROPOSED INTEGRATED PLANNING FRAMEWORK

NDS

MTEF

Action Plans & Implementation

and Delivery

Development Long-Term Planning/Goals

European Integration

Goals

Medium-Term Strategic Framework

Crosscutting Strategies

Sector Strategies

Macro Option Costing

1-3 Year MTEF & Budgets

Policy Goals (NDS)

Programmes Objectives (Sector Strategies)

Programme Budgets

Expected Outputs (MTEF)

Activities

Government Programme [Medium-Term Horizon]

Public Investment & External

Assistance Project Proposals

Macro Crosscutting Strategies [Long & Medium Term Horizons]

EU Integration / MSA

Implementation Plan

Macroeconomic Stability

Regional Strategies

Decentralization

Delivery Instruments

Government Work Plan

Sectoral Monitoring Reports

Evaluations Reports

Action Plan Instruments

NDS Implementation Road Map

SAA Implementation Plan

Ministry Sectoral Plans

Legislation Plan

IPA Sector Plans / Donor Priorities

Ministry Monitoring Plan

Kosovo Development Vision

Consensus-building exercise,

involving all parties, civil society

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C. Components of an Improved Planning System

1. Improvement of Strategic Planning Framework Kosovo needs to introduce a comprehensive strategic planning framework. There is generally no coherent approach that links long-term goals to a medium-term strategy through which cross-cutting and sector strategies inform the MTEF process. Planning levels are not linked properly through the macroeconomic framework or costing scenarios. With over 80+ sector strategies and other levels of planning documents, there is a huge tendency of fragmentation, inconsistency, and visible bottom-up pressure leading to unrealistic plans that have not been prioritised. Different levels and types of priorities are not clearly or consistently defined2, while in most of cases precise indicators and targets are missing. Sector strategies can be hardly used as strategic plans or properly monitored. Two key actions that will aim to improve the strategic planning framework will include:

Preparation of National Development Strategy, and

Consolidation and improvement of sector strategies framework

1.1 National Development Strategy Kosovo will introduce its National Development Strategy (NDS). The National Development Strategy (NDS) will serve as long-term visioning and consensus building document. NDS will evolve into a comprehensive strategic planning framework towards medium to long-term planning. Based on NDS, coherent, costed, mutually consistent sector and cross-cutting strategies will be developed that support the national vision and serve as the policy basis for the annual MTEF process. While retaining focus on growth and economic development, NDS’s primary mandate will be to ensure that all national goals, including EU integration are appropriately reflected. NDS will identify higher-level indicators and use focused monitoring to determine how well Kosovo is progressing towards its long and medium-term goals. An NDS Implementation Roadmap will be prepared as a mechanism for effective NDS monitoring with a focus on implementation and delivery. This will be a standardized document within the NDS Implementation Roadmap, which besides planning for the current year should include sufficient indications for next 3 years. In-year planning would - as currently - reflect the last approved budget and drive activities, while indications for outer years would drive MTEF submissions. Implementation of NDS measures will come with new accountability arrangements. It will necessitate an approach that puts more emphasis on delivery, and performance and results-based management. The adoption of a long-term, NDS-type document would undoubtedly mark an evolution of the policy planning and monitoring system in Kosovo. It should be a step for providing direction to help government planning to become more focused. However, by itself the NDS is no universal remedy; to display its effects, in fact, it would

2 In fact, the word “priority” is used to describe a diverse range of actions and concepts

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need a number of complementary actions/reforms, and new management approach, optimally including:

Sector Strategies should mark NDS measures as top priority, ranking any other sectorial priority at a lower priority order. The same portfolios would also, preferably, extend into cost details through 3-years MTEF instruments.

In budgeting/MTEF, it is eminent to move towards a programme-base structure of MTEF and annual budget at least in relation to NDS/sector strategies related programmes, so to allow the actual matching of ceilings and appropriations to specific NDS/sector strategies objectives.

In implementation, an evolution of monitoring systems shifting to implementation and delivery, that at least for NDS monitoring would add (the present monitoring near-exclusive focus on activities and deadlines) a focus on NDS outputs delivery and performance indicators. The use of such data should not be confined to periodic reporting, but also used to identify and solve obstacles to actual delivery.

NDS should address the specific constraints to Kosovo's growth - it must be based on a small

number of priorities, so that focusing resources can have significant impact.

The NDS priorities shall be the highest in hierarchy, and take precedence over all other policy in any other documents - the rest of priorities should be addressed in the sector strategies.

Ministers and institutions responsible for NDS priorities shall produce clear actions of what they’ll do to achieve the NDS targets. These documents shall be treated as very public commitments to Kosovars, and notified to development partners.

NDS actions should enjoy full financial coverage, with preferential access to any additional resources from the national budget and/or international development partners. To make this transparent, the NDS priorities shall be entered into the MTEF and annual budget with a high priority

1.2 Consolidation of Sector Strategies Framework The hierarchical relationship between long-term NDS and Sector Strategies is very important. Ideally, implementation of NDS priorities should go through the top priorities in Sector Strategies, which would in turn be operationalized through MTEF and annual budgeting and work planning. The sector strategies framework will be consolidated. Consolidation of sector strategic documents will be the first step for improving sectorial planning. With over 80+ sector strategies and other levels of planning documents, there is a huge tendency of fragmentation, inconsistency, and visible bottom-up pressure leading to unrealistic plans that have not been prioritised. Sector strategies will be the cornerstone of the new system, integrating policy and financial planning and connecting long and medium-term planning with budget formulation. Introduction of NDS will initiate a multi-year process of re-assessing and adapting existing sector strategies (if necessary) or guiding ministries on developing new ones in line with NDS approach. In such a perspective, gaps in sector-wide planning shall be addressed upon the approval of the NDS. Portfolios that still miss a unified approach should consolidate their many documents, and those that have done it already shall upgrade their Sector Strategy by adjusting to NDS priorities. This streamlining is needed for NDS items having to compete against lower “priorities”; it would also benefit non-priority ones by eliminating waste from planning duplicate or obsolete priorities.

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1.3 Actions During 2015,

1. SPC should approve criteria of what should be considered a sector strategy. This should limited to around 20-25. The rest should be called “plans”, “programmes, or something similar.

2. SPO develops guidelines for preparation of consolidated sector strategies. This should aim to turn sector strategies in documents that provide focused priorities, concrete and costed measures that could be included in the MTEF.

3. New sector strategies are prepared / piloted for two or three sectors based on the NDS approach and new guidelines.

4. Asses the need for reviewing sector strategies or preparing news one. Through December of 2015, a joint assessment by SPO, MoF, MEI, and each individual ministry should determine the specific policy and capacity gaps and the level of effort and technical assistance required to complete all IPS requirements, including sector strategies. This will enable a tailored plan for each ministry to be designed. The plan could also be informed by the quality of 2016-18 MTEF submissions and sector strategies. A plan for revising the sector strategies should be completed by the end of 2015.

During 2016 and 2017,

5. Prepare Sector Strategies for (as many as possible in 2016) the rest of the sectors. Attention should be placed on those ministries requiring assistance to complete full sector strategies.

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2. Improvement of Strategic Decision-Making Process Kosovo’s existing planning process does not provide the Prime Minister and Ministers with an opportunity to set strategic direction at the outset of the process. Instead, finished products arrive too late for the Government to review in depth. Key decision are often taken on an ad-hoc manner and not supported by a sound planning and policy dialogue process. With the introduction of the proposed new system, strategic planning demands on decision makers will increase. The system will aim that decision makers are better served and engaged since the start in the policy discussion process. The major implication of the new planning system for decision makers is the requirement that the Government assumes a more strategic role and be engaged much earlier in the planning process. For example, the PM (on behalf of the Government) should establish strategic priorities within the context of the macroeconomic assessment before ministry MTEF expenditure ceilings are established, the same on allocations of public investments, donor funding, etc.

The main objective under this component is improvement of policy coordination, decision making and strategic direction process, both at the central Government and line ministries level.

(i) Improving policy coordination and decision making process at central Government level

At the moment there exist two high level strategic committees, the (i) Fiscal and Budget Affairs Committee (FBAC) and (ii) the Public Investment Committee. These committees formally exist since over three years, but so far they have not been fully operational, nor systematic proceedings. The current structure and functions of these two committees are constrained due to several reasons; first, their primary (almost exclusive) focus on budget process provides limitations to their involvement in the overall policy coordination and decision making; second, the two committees are supported by a weak inter-institutional coordination mechanism; and, third in practical terms proceeding of these two committees are not supported by a clear and well-structured process or calendar. To address the above, it proposed to re-organise these two committees through merging them into one structure3 and add few more functions related to overall strategic prioritisation of policies and decision making process.

At the central Government level the recommendations is the creation of Strategic Planning Committee (SPC), at top level to oversee and guide the policy planning and prioritisation process. The SCP will aim to ensure involvement of the PM and the highest level of decision making, and give full political support to the process, significantly necessary for the success of these reforms. The SPC will be supported by a full year around integrated planning calendar (see the relevant section) and be supported at technical level by an inter-institutional coordination mechanism through the Strategic Planning Steering Group4 (SPSG).

3 The name would be suggested to change, in order not to narrow its focus to any of the existing (limited) process and second, still, to be perceived as a novelty that is expected to make a difference in the high level coordination and decision making. 4 SPSG is composed by top technical senior level representatives of OPM, MEI, Mo, MPA

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The Strategic Planning Committee will be led by the Prime Minister and composed (permanent members) by Deputy Prime Minister(s), Minister of Finance, Minister of European Integration, Minister of Trade and Industry. Other ministers can participate in meeting of SPC depending on the subject of discussions. The Strategic Planning Committee will be involved in all major planning decisions before being submitted for Government decisions, including; setting the government’s strategic priorities; approving the NDS, sector/cross-cutting strategies; reviewing new policy initiatives prior to submission to Government; establishing the macroeconomic framework; determining aggregate and sector MTEF ceilings; reviewing strategic issues related to public investment and external assistance; the Government’ annual work programme. It is important to consider that the new committee should not be considered as new structure, rather than reshuffling and functionalizing the already existing ones, with few more functions added. The SPC will replace the FBAC and PIC.

(ii) Improving policy coordination and decision making at line ministries level

One the policy coordination is strengthened at the central Government level, the next challenge would be to improve (based on the same approach) the process of policy coordination and decision making at the level of line ministries.

Strategic Management Group (SMG) is suggested to be established in each Line Ministry

A Strategic Management Group should be established at each line ministry (mirroring the approach of SPC, but at line ministry level). The SMG will lead by the Minister. The ministry’s senior management will form the Group and assure the quality of decision making and monitor the implementation of their ministry’s plans under NDS, European Integration agenda for the sector, Sector Strategy, METF, public investment and external assistance plans. The SMG will be involved in all major planning decisions before being submitted further to SPC or central government decisions, including; setting sector’s strategic priorities and sectorial new policy initiatives; approving the sector/cross-cutting strategies; determining aggregate sector and programmes ceilings prior to submission to MoF; finalizing and approving the MTEF/Annual Budget submission for the sector; approving sectorial input to the Government’ annual work programme. The group should be led by the Minister, coordinated by the General Secretary and comprised by key Departmental Directors.

Political and Administrative Bodies

Oversight Policy Planning and Coordination process

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2.1 Actions 1. PM issues an order for establishing the Strategic Planning Committee (SPC) (based

or re-shuffling of Budget and Fiscal Affairs Committee and Public Investment Committee) to chaired by the Prime Minister and comprising the Deputy Prime Minister(s) and Ministers from central institutions. Define roles responsibility and modalities of its operations.

2. A 12 months integrated planning calendar is prepared in advance defining the (indicative) milestones for decision making expected by the SPC

3. PM issues an order for establishing of Strategic Management Group (SMG), to be chaired by the Minister, in each Line Ministry

Line Ministries / Strategic

Management Group

Strategic Planning

Steering Group

Strategic Planning

Committee

Cabinet of

Government

Core Planning Processes

NDS / Sector Strategies

European Integration

Government Programme

MTEF/Budget

Public Investment

External Assistance

Public Administration Reform Council

- Composed by high

Government Officials

- Guiding Institutional changes

Chaired by the Minister,

coordinated by General Secretary, with senior

Departmental Directors (Head of Programmes)

Chaired by a high Official of the Cabinet:

Members OPM (SPO, GCS, LO), MoF and

MIE

Chaired by the Prime Minister:

Ministers of Finance, European Integration, DPMs,

others.

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3. Process Integration - Integrated Planning Calendar The tendency in Kosovo has been to create autonomous planning frameworks, each with its own set of process requirements. At the moment individual calendars exist for national and sector strategies, MTEF, Annual budget, EU integration, legislative planning, monitoring the Government Work Plan etc. Each planning framework develops its calendar independently and different frameworks use different time horizons and are updated at different periods or not at all.

The objective under the Integrated Calendar is to establish a (full year) planning calendar that effectively sequences all the actions and decision making points leading the various planning processes toward their integration (in the best case) or maximum harmonisation (where this possible).

3.1 Actions In 2015 (to be repeat each year)

1. A specific calendar for each IPS component, core planning and budgeting process in Kosovo (NDS, MTEF, EI, GWP, etc.), be prepared in the first weeks of January by respective central institutions (SPO, GCS, LO, MEI, MoF) and presented and discussed by SPSG.

2. On behalf of the SPSG, the SPO integrated all individual calendars into a joint Integrated Planning Calendar of all core planning and budgeting and monitoring and related decision making processes in Kosovo

3. The Integrated Calendar is presented for approval in the first meeting of SPC for the current year.

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4. European Integration Planning The centrality of EI to Government planning and IPS will be only increasing over the coming years. EI will be a driving force of the national vision and the policy goals that underpin NDS and sector strategies. It will affect every sector and identify detailed commitments from most ministries. For this purpose a joint effort will be needed by the Ministry of European Integration, OPM/SPO and the Ministry of Finance to provide a detailed plan and methodology on the appropriate role of EI in NDS and MTEF and on mechanisms to integrate its various components into IPS general processes. The EI planning institutional framework is already well defined. The institutional set up for managing the EU agenda is relatively good, the leadership of MEI in the process is remarkable, and there is no need for major institutional changes. In 2015, two new requirements might be added to the existing EI planning framework:

The Stabilization and Association Agreement Implementation Plan (SAAIP), which will detail the action to be carried by Kosovo institutions for implementation of Stabilisation and Association Agreement with the EU; and

The National Plan for the Adoption of the Acquis (NPAA)5 represents the incorporation of European legislation into the body of Kosovo law, it involves the amendment of Kosovo laws to bring them into compliance with European laws.

The main objective remains the full reflection of the European Integration agenda at all levels and stages of Government planning. While recognizing that EI involves unique reporting requirements, and EC-determined deadlines, every effort must be made to harmonize EI planning and monitoring with NDS, MTEF and GAWP. Beginning in 2016, all EI requirements need to be linked to the appropriate ministry planning documents and reflected in its priorities, goals, objectives, activities, outputs and budget.

4.1 Actions 1. European integration (EI) planning and decision be fully integrated within the new

Integrated Planning System, while recognizing its unique requirements. MEI and SPO make an assessment of EI decision making system and explore how that can be aligned further (if this is the case) with overall IPS architecture. EI be deemed a cornerstone of the national vision exercise developing NDS`s high-level indicators and sector strategies

2. EI agenda is fully reflected in all components of the Integrated Planning Calendar as of 2015.

3. Review EI calendar, introducing decision making milestones where SPC/PM decisions might be involved (if this is the case).

4. Preparation of the SAA Implementation Plan

5. Preparation of National Plan for Adoption of the Acquis (NPAA)

5 The Ministry of European Integration intends to prepare this plan following the experience of all pre-accession countries. However, a formal decision on this is still to be taken.

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5. Medium-Term Expenditures Framework / Annual Budget Kosovo has made remarkable progress in improving its budget planning process. Despite of the notable progress, there is still need for better translating national and sectorial policy priorities into the MTEF and Annual Budget. The links between MTEF/Annual Budget and strategies need to be improved and better supported by an effective prioritisation process and decision making. This also links to improving the ability of costing and prioritisation of policies. The scope of proposed changes related to improvement of MTEF and Annual budget planning framework is far-reaching.

Main objectives under this component include:

Improvement of decision making related to MTEF / Annual Budget. The PM and other high level decision makers should be more actively engaged sine the outset of the MTEF/budget planning process. The establishment of the Strategic Planning Committee (see recommendations on decision making) and its role in reviewing / approval of the macroeconomic forecast, MTEF policy priorities, and ministry/sector ceilings should bring a positive development in this process.

improvement of MTEF/budget`s strategic orientation. Linkages between the MTEF with sector strategic documents should be improved; introduction of NDS and revision or new sector strategies is expected to improve the process; special emphasis in 2016 should be placed on better reflecting EU integration agenda in the MTEF/Annual Budget.

Improvement of MTEF / budget structure. A new programme-based budgeting structure should be introduced; this should include linking ministry MTEF expenditure ceilings to programme policy priorities, objectives, outputs, output indicators/targets, and activities, over a three years period. Ministry / sectorial expenditure ceilings should be disaggregated further from sectorial to the level of programme ceilings.

Increase further of consistency between BDMS annual PIP system. Significant steps are being made already in harmonising the BDMS and PIP systems. Introduction of programme based budgeting might require further consideration, leading toward an integrated budget planning software, based on new procedures (mention earlier) and budget programme structure. The need for such system might need to be looked at further.

Improvement of MTEF / Budget Planning Cycle and Calendar. An option that might be considered is possibility of introducing a “two-rounds” MTEF/Annual Budget preparation process. That would require that the final (second) stage of MTEF approval would be at the end of the budget calendar (September), together with the approval of the Annual Budget. This would allow for MTEF ceilings and (if needed) priorities to be revised in accordance with macro forecast reviews in June (for the mid-term review), but also (if needed) in September when the full budget cycle is completed prior to Government Approval. Given that this requires changes of the existing budget law, the option will be given further consideration, and in case of a positive decision relevant actions will be taken in 2016 and affect the 2017 planning cycle.

Strengthen involvement of ministries` senior management level in the budget process, overseeing and monitoring all core policy and financial processes as a fundamental part of their responsibilities. A standing a Strategic Management Group (see chapter on decision making), chaired by the Minister,

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should be formed in each line ministry and be responsible for all decisions related to MTEF/Annual Budget.

5.1 Actions The following summarizes a set of recommended action that could be carried out over the period 2015-2017, that should affect MTEF in line with overall IPS implementation. In 2015

1. Review MTEF/Annual Budget calendar, introducing decision making milestones where SPC/PM decisions are involved.

2. Inclusion in MTEF 2016-2018 of indicative NDS priorities; SAAIP and Government Programme (GP) objectives and targets

3. refine costing of NDS, SAAIP/NPAA and GP outputs for the first three years of MTEF

In 2016

1. A new Budget Programmes Structure is piloted6 in two-three ministries, using separated budget submission forms7.

2. Prepare new guidelines for MTEF / Annual Budget preparation based on “programme structure”, to be introduced as of 2016 cycle.

3. Full inclusion in MTEF 2017-2019 of NDS and SAAIP priorities

4. Refine costing of NDS, SAAIP outputs for the next three years of MTEF

5. Asses the option of introducing a “two-round” MTEF preparation process. That would imply that final approval of MTEF should take place at the end of the budget planning process (September-October)

6. 1st wave of reviewed sector strategies inform establishment of MTEF preparation ceilings

7. external assistance reflected in MTEF and Annual Budget

In 2017

1. The new Budget Programmes Structure extended to all or (2nd wave) a selected number of line ministries8.

6 In the earlier section it is proposed that a “programme structure” is also applied in the new guidelines for preparation of new sector strategies. The two or three strategies proposed to be piloted also during 2015 should adopt the same programme structure as MTEF/Budget 7 One of key requirement for introducing budget programme structure is integration of recurrent and capital expenditures planning procedures. This might be difficult under the current features of BDMS and PIP system. For this purpose new budget submission forms need to be introduced 8 A decision on this should be taken based on assessment of the situation and experience from the first wave of piloted line ministries in 2015.

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2. Training (large-scale) provided to MoF / Budget Department and Line Ministries on new “programme based budget structure” and related procedures

3. Disaggregate of MTEF / annual budget ceilings from sector also to programme level. Introduction of ceilings for recurrent and capital expenditure also at programme level

4. Inclusion in MTEF 2018-2020 of reviewed NDS and SAAIP priorities

5. Refine costing of reviewed NDS, SAAIP and GP outputs for the next three years of MTEF

6. 3rd wave of reviewed sector strategies inform establishment of MTEF preparation ceilings

7. Disaggregation of MTEF / annual budget ceilings from sector also to programme level applied to all line ministries. Introduction of recurrent and capital expenditure ceilings also at programme level for all line ministries.

6. Public Investment Programming The current PIP system used in Kosovo is sufficiently good for project appraisal and (at least in principle) for project prioritisation, but it need to be linked more effectively with the rest of planning and strategic prioritisation processes. It is essential that the process of planning and prioritisation of public investment be re-organised in the view of overall IPS architecture. The government should implement a revitalized planning and management process for Public Investment that better aligns proposals with government priorities and sector strategies. Suitable projects should be identified earlier in the planning cycle.

Main objective under this component is enhancing the link between public investment projects with NDS priorities and sector strategies through a policy dialogue and sound prioritisation process, as integral part of the MTEF / Annual Budget planning

Two major process improvements are proposed:

i. Reviewed PIP procedures that ensure that PI proposals are identified through the government’s IPS strategic planning processes (NDS/Sector Strategies/MTEF);

ii. A new institutional set up and procedures of decision making for PI, following the IPS architecture. Decisions on allocations of PI projects should involve the PM/SPC at an early stage of planning, following earlier review/prioritisation process first by MoF and second by SPSG. A “three stage PI review process” should be considered; first review by MoF, second by SPSG; third review and final decision by SPS (see details further in this section).

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The chart below illustrates the PI review process through which individual projects receive quality control and budget control reviews.

6.1 Actions The following are the proposed actions to be taken over the period 2015-2016: 1. PI planning shift from a project-by-project to a sector policy basis prioritisation process

where PI are identified in the frame of delivering the NDS / sector strategies strategic priorities through the MTEF / Annual Budget process.

2. Refine the PIP selection procedure, encouraging a proactive, early project

identification and selection phase, where PI projects are submitted for review and approval in advance of MTEF / Annual Budget and external funding decisions.

i. Revise the procedures for PIP review, allowing the “three stages review process” (MoF-SPSG-SPC) prior to completion of MTEF/Annual Budget and Government Decisions.

ii. First review is conducted by MoF/Analysts of Budget Department, as per the current process.

iii. Develop procedures for SPSG “second level review” (the role of SPSG would to be to “filter” those projects that should go for the third stage, review of SPC).

First quality review by MoF / Budget Department Analysts;

Second review (filtering) by Strategic Planning Steering Group (SPSG)

NO

for major / large projects requiring specific strategic

decisions

YES

assign project # and include in PIP and EA “project pipeline”

further progress depends on funding approvals through MTEF or a donor programs

Approved?

Ministry develops / review project proposal (PIP) as per sector

strategy

Figure: Review and Approval Process for Public Investment Project

NO

Meets standards and match priorities?

Third Review by Strategic Planning

Committee

Send back to LMs for further improvement

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3. Special procedures be developed for SPC “third stage review” for approving project

of higher costs or priority

i. Criteria be developed to determine when a costly, contentious, or complex PI (external or donor funded) project requires review by a SPC prior to approval by the Government. Mega projects, beyond the capacity of ministries to fund within their MTEF PI ceilings, be considered by the SPC / government prior to and reflected in the establishment of ministry MTEF expenditure ceilings, or ad-hoc Government decisions;

4. Refine procedures for preparation of a “Pipe Line of PI projects” for further funding. The pipeline should not require new procedures as the PIP system is able to identify this list. PI projects pipeline should outline Kosovo’s PI priorities and requiring domestic or donor funding in the coming policy and budget cycle.

7. External Assistance Management External assistance planning has been being managed rather fragmented manner and benefiting from little background work on prioritisation. The process of allocation of external funding is often ad hoc or donor-driven. It is essential that the process of planning and prioritisation of donor funded projects be re-organised in line with the overall new IPS architecture. The government should implement a revitalized system for planning and management of External Assistance that aligns donors` funding with government priorities under NDS, sector strategies, SAAIP. NPAA, identifies suitable projects earlier in the planning cycle, improves appraisal quality, and increases the rate of actual vs. planned disbursement.

Main objective under this component is establishment of planning process that effectively integrates the donor funding with Government priorities and MTEF.

The following actions would be considered to improve External Assistance management in line with the improved planning architecture. A comprehensive external assistance planning and management system should be implemented in line with IPS processes, with External assistance planning shift from a (generally) project-by-project to a sector policy basis where projects are identified to deliver NDS / sector strategies policy priorities and reinforce the government’s strategic priorities under MTEF:

Improve institutional set up and procedures for strengthening EA management and decision making, following the IPS architecture.

New EA management procedures that ensure that donor funded project proposals are identified and reviewed through the government’s strategic planning processes (NDS/Sector Strategies/MTEF/PIP); and,

Decisions on allocations of EA projects should follow the same “three stage review process” as PIP (see further details below)

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The chart below illustrates the EA projects review process through which individual projects receive quality control and budget control. This process is intended to capture potential projects and create the basis for a pipeline of projects that could be negotiated for donor funding.

Three new elements should be added in the cycle of review and approval of EA / donor funded projects

- First, after the initial assessment of MEI, the project proposals should be reviewed by the Strategic Planning Steering Group9 (SPSG). Within the SPSG review framework; the SPO makes sure that project proposal comply with NDS / Sector strategies priorities; MEI checks their compliance with EI priorities and/or overlapping with other donors funding; while MoF reviews projects in relation to MTEF funding gaps, as well as efficiency (value for money), co-financing fiscal space, and recurrent expenditures implications.

- Donor Programmes or Funding Agreements (i.e. annual programme of IPA, or World Bank county portfolio, etc.), should be subject of final review by SPC, prior to a final Government decision (or Parliament in case of loans).

- An “EA Project Pipeline”10 should be prepared and reviewed annually. Projects for which funding is still being sought should be channelled into the “EA

9 SPSG is composed by representatives of OPM Offices, MEI and MoF. 10 often called “EA Strategy”

First quality review by MEI / or unit assigned for EA Coordination;

Second review by Strategic

Planning Steering Group (SPSG)

NO

Send back to LMs for further

review and improvements

Third Review by Strategic Planning

Committee

meets standards and match priorities?

Only for major / large projects requiring high-level decision making only

YES

assign project # and include in the EA “project pipeline”

further progress depends on funding approvals or further negotiations with donors

approved?

Line ministry develops / review project proposal for donor funding based on MTEF funding gap Line

Figure: Review and Approval Process for Donor Funded Projects

NO

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Project Pipeline” for further discussion and negotiation with donors. The “Public Investment and EA Projects Pipeline Document” should be prepared and refreshed annually at the end of MTEF / Annual Budget process. The document should be used for further negotiations with donors.

Proposal - review - approval both domestic and externally funded projects should be a full year around cycle. Ministries, in principle, can apply for new project to MoF and MEI any time during the 12 months of the year.

7.1 Actions In 2015

1. Review rules or procedures and roles and responsibilities for EA management.

2. Introduce new procedures for the review and approval of EA / Donor funded project,

based on IPS architecture, including:

i. revise the procedures for EA project review, allowing the “three stages review process” (MEI(+) - SPSG - SPC)

ii. Develop procedures for SPSG “second level review / filtering of projects”

iii. Develop procedures for SPC “third stage review”

iv. MoF / MEI define procedures on identifying “funding gaps” at the end of MTEF process and needs for donors funding

3. Methodologies, standards and formats be developed to guide line ministries in the EA

project preparation and submission process (identification, feasibility and appraisal stages).

In 2016 4. An annual EA Project Pipeline Document be prepared outlining Kosovo’s external

assistance priorities and identifying potential projects requiring donor funding that support the government’s strategic priorities. The document should be linked and in the best case integral part of PIP Project Pipeline.

5. An annual report be prepared outlining the achieved versus expected results and

contributions of external assistance.

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8. Integrated Monitoring - Accountability and Delivery The integrated planning and monitoring principles require that an integrated MIS be put in place that would capture all Government and ministry commitments. Although the government receives results reports during the year from various sources (e.g. GCS, SPO, MEI, MoF), the monitoring is not always tied to the planning cycle. There have been good efforts over the past year to improve the monitoring and reporting systems in Kosovo. Several online Management Information Systems (MIS) are established, including; the GAWP MIS; EI MIS; GoK decision MIS; System for monitoring the legislative programme; MIS for the AP for Visa Liberalisation. However, this proliferation has led to some fragmentation of monitoring of line ministries by multiple central organizations using inconsistent formats. All these systems are operating individually with limited connection or interfaces with each other. Existence of many systems increases the burdens over line ministries who have to up-load information on reporting within the same period (mainly quarterly bases) into different systems. If not addressed, excessive monitoring requirements and inefficient organization of this function will adversely affect ministry performance. The GCS / GAWP MIS should be used as the exclusive system for capturing and monitoring performance of Government institutions. The GAWP monitoring has been working sufficiently well until now, but it needs further improvements to become a mechanism providing more qualitative feedback to high management level of the GoK with regard to the implementation of the government programme. The GAWP reports need to focus more on qualitative aspect of performance. The GAWP should improve information / indicators on performance towards reaching policy priorities or goals that measures belong to, thus providing more qualitative feedback to political decision making. The expansion of the GAWP MIS to cover all planning frameworks does not prevent the development of other databases where special requirements exist, such as MEI Monitoring System, AMP (aid management platform), PIP and budget preparation software. In principle the development of parallel databases should be discouraged. Nevertheless, it should be recognised that, realistically, some parallel monitoring will exist one their own, for a while. For example, monitoring of European Integration agenda will take a while to be fully integrated with the rest of Government monitoring and reporting system. This, because of its very specific requirements of the EI process; dynamics of reporting to EC; institutions set up (all EI integration process is managed in a full closed cycle by MEI, where OPM and MoF have limited involvement). Thus, attention should be paid to synergies and overlapping between GAWP MIS and the other monitoring systems. Where possible these systems should be integrated and where this is not yet the case, than maximum harmonisation should be aimed.

The main objective under this component is to establish an integrated Monitoring System should provide the high level decision making with the monitoring information they need to track major government commitments (including all agreed European Integration initiatives); and provide ministry management with comprehensive information on the delivery of ministry operational plans.

Proposed interventions include:

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i. Introduction of Ministry Integrated Monitoring Plan. They reports should not differ in structure and approach from the latest GAWP methodology, on the contrary they should become integral part of GAWP process. It should just add more focus to sector/ministry monitoring and seek to integrate all monitoring requirement for the given ministry / sector. In principle they should not pose extra work for line ministries, that what they should do for preparing GAWP.

ii. Improved integration and communication between GCS / GAWP MIS and other MIS-s

iii. Integration of reporting from different OPM units into a single report for the PM/Government

8.1 Actions In 2015 1. The GCS/GAWP MIS be confirmed as the primary performance monitoring system

for use by central institutions and ministries in implementing the integrated planning system.

2. An official common methodology and structure be developed (jointly by GCS, SPO,

MEI) to ensure consistency and common terminology for all planning and monitoring frameworks and be used by GCS / GAWP and all line ministries.

3. An Annual Monitoring Plan (for 2016) be prepared by each line ministry and

negotiated with OPM, MEI, MoF. It should identify which major priorities and output targets will be monitored by central institutions and which should be subject to internal ministry monitoring. GCS should develop the respective procedures and guidelines.

4. GCS be resourced to support the MIS on an ongoing basis as a core departmental

function.

5. Clarify modalities, roles and responsibilities for monitoring NDS Implementation Road Map and (existing), which in principle should be done in the framework of GAWP. SPO and GCS should develop a joint proposal on addressing this issue.

In 2016

6. Ministries Annual Report be produced (by mid-February at the latest) identifying the

results achieved vs. the commitments and approved budgets set out in the Ministry Integrated Annual Report for 2015. It should inform start of MTEF preparation process. The SPC (and if deemed appropriate the Cabinet) be informed about the results of monitoring for 2015. This exercise should be repeated annually.

7. Develop interfaces between the GCS/GAWP MIS and other MISs (MEI, MoF), allowing them to exchange information/data for different users.

8. The GCS MIS / GAWP be harmonized with the NDS / MTEF / Annual Budget classification system with implementation of the redesigned system occurring in 2017.

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9. The GCS MIS captures all approved ministry outputs and output targets and that they be specially coded to enable specialized monitoring, (for example of items from the Government Programme or SAA Action Plan).

10. Ministries Prepare Annual Monitoring Plan for 2017

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ANNEX – IPS IMPLEMENTATION CALENDAR

KEY MILESTONES: IPS IMPLEMENTATION: 2015-2018

Period Action

2015:

May.-June

PM/Government issues an order for establishing the Strategic Planning Committee (SPC),

SPC approves Integrated Planning Calendar (remaining part of 2015)

PM order for launching NDS preparation (or Government decision).

Review MTEF/Annual Budget calendar, introducing decision making milestones where SPC/PM decisions are involved.

2015: July-Sept.

NDS is finalised and adopted by SPC / Government

Inclusion in the (revised) MTEF 2016-2018 of indicative NDS priorities and Government Programme (GP) objectives and targets

Annual Budget 2016 is finalised

SPC approves criteria for consolidation of sector strategies. The number of sector strategies limited to around 20-25.

SPO reviews guidelines for preparation of new sector strategies. Revised guidelines on preparation of sector strategies to be introduced in the Rules of Procedures, accordingly.

2015: Oct.-Dec.

PM issues an order for establishing of Strategic Management Group (SMG) in each Line Ministry

NDS Implementation Roadmap is prepared and approved by SPC

SPO / GCS develop monitoring modalities for the NDS and ensure dissemination / training of line ministries. SPO / GCS produce a more detailed mapping of delivery processes of NDS Roadmap, and key institutions with the definition of the roles and responsibilities of all the institutions that will be part of the implementation and monitoring of NDS.

SPO, MoF, MEI jointly assess the need for reviewing sector strategies or preparing news one in 2016-2017. SPO prepares a tailored plan for revising the sector strategies or developing new ones for the period 2016-2017

MEI prepares National Plan for Adoption of the Acquis (NPAA).

MoF/SPO prepares new guidelines for MTEF / Annual Budget preparation based on “programme structure”, to be piloted in 2016.

PM/SPC order, GCS/GAWP MIS be confirmed as the primary performance monitoring system for use by central institutions also for NDS monitoring.

An Annual Planning / Monitoring Plan for 2016 (as part of GAWP input) be prepared by each line ministry and negotiated with OPM,

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MEI, MoF. GCS should develop the respective procedures and guidelines.

2016: Jan.-June

SPC approves 2016 Integrated Planning Calendar

Ministries Annual Monitoring Report (for 2015) be produced by GCS and submitted to PM/SPC

A new Budget Programmes Structure starts being piloted in two-three line ministries. MoF prepares the guidelines and procedures

Line ministries start piloting / preparing Sector Strategies for (as many as possible in 2016).

OPM leads preparation of a limited number of crosscutting strategies (in addition to sector strategies) to address policy commitments that do not fall under the remit of a single line ministry.

Full inclusion in MTEF 2017-2019 of NDS and NPAA priorities

Refine costing of NDS, NPAA outputs for the next three years of MTEF

2st wave of reviewed sector strategies inform establishment of MTEF preparation ceilings

MTEF 2017-2019 adopted by SPO/Government

MoF refines the PIP procedures, allowing the “three stages review process” (MoF-SPSG-SPC) prior to completion of MTEF/Annual Budget and Government Decisions

MoF defines procedures for preparation of a “Pipeline of PI projects” for further funding.

GCS starts developing interfaces between the GCS/GAWP MIS and other MISs (MEI, MoF), allowing them to exchange information/data for different users.

SPC approves methodologies, standards and formats be developed to guide line ministries in the EA project preparation and submission process (identification, feasibility and appraisal stages).

Revise the procedures for EA project review, allowing the “three stages review process” (MEI (+) / SPSG / SPC). Develop procedures for SPSG “second level review”. Develop procedures for SPC “third stage review”

2016: June-

December

An annual EA Project Pipeline Document be prepared at the end of MTEF process

Annual Budget 2017 approved

The GCS MIS / GAWP be harmonized with the NDS / NPAA / MTEF / Annual Budget classification system with implementation of the redesigned system occurring in 2017.

The GCS MIS captures all approved ministry outputs and output targets and that they be specially coded to enable specialized monitoring.

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SPC approves second waves of Sector Strategies (NDS) prepared in 2016

Ministries Prepare Annual Work Monitoring Plan for 2017

2017

SPC approves 2017 Integrated Planning Calendar and year-end report on Ministry Monitoring Plan (2016 results)

3rd wave of reviewed sector strategies finalised and used to inform MTEF priorities and preparation ceilings

The new Budget Programmes Structure extended to all or (2nd wave) a selected number of line ministries11.

SPC decides to disaggregate of MTEF / annual budget ceilings from sector also to programme level. Introduction of ceilings for recurrent and capital expenditure also at programme level

Training (large-scale) provided to MoF / Budget Department and Line Ministries on new “programme based budget structure” and related procedures

Inclusion in MTEF 2018-2020 of reviewed NDS and NPAA priorities

Refine costing of reviewed NDS, NPAA for the next 3 years of MTEF

Ministries Prepare Annual Monitoring Plan for 2018

NDS Annual Progress Report (2016 results)

2018 Mid-term review and updated NDS document completed

Implementation of all IPS processes as initiated in previous 3 years

11 A decision on this should be taken based on assessment of the situation and experience from the first wave of piloted line ministries in 2015.