The Kosovo authorities and European Commission discuss the economy, statistics and financial control

The Commission congratulated Kosovo on achieving a staff level agreement on a new Stand-by Arrangement with the IMF. The Commission also focused on the importance of the recently adopted Council Conclusions on the Economic Reform Programme and stressed the need for Kosovo to focus on the implementation of the recommendations.

In the area of economic and fiscal policies, the key economic indicators were discussed including GDP growth, inflation, the labour market and the balance of payments. Despite public wage and pension increases, as well as higher remittances, economic growth slowed down in 2014. Due to the political circumstances some public investments were delayed. The production base remains weak and investments mostly focus on the retail sector.

The Government presented the changes in the fiscal policies and plans to change the fiscal rule to allow for more development oriented capital projects. The Commission invited Kosovo to strengthen the fiscal rule enforcement and monitoring mechanisms to avoid ad-hoc decision making and re-establish credibility of fiscal policy. In view of the expansionary fiscal policy focused mostly on infrastructural projects, the Commission encouraged the Government to set up an advisory body that will contribute to the assessment of major infrastructure projects, including their fiscal impact, and ensure that they are aligned with the regional agenda.

The authorities presented the state of play of key structural reforms in sectors such as health, education, public administration and privatisation. As in the past years, the Commission recommended a strong prioritisation of expenditures among the vast and pressing needs – such prioritisation needs to be reflected also in the next Economic Reform Programme to be submitted to the Commission in January 2016. The Commission took note of the progress made, and stressed the need to address pressing issues  such as improving access to finance, deficient rule of law, widespread informal economy and inadequate professional education.

In the area of statistics, the Commission pointed to the need to adopt the amendments to the Law on Statistics and for the Government to commit and ensure sufficient human and budget resources to Kosovo’s Agency of Statistics in order to fully implement its mandate. The discussion also focused on the requirement to strengthen national accounts, business statistics, and to fully implement ESA10 regulation in all areas.

The Commission stressed its positive assessment and support for Kosovo’s new Strategy Paper on Public Internal Financial Control (PIFC). The Paper shows considerable ambition in its outlook, and the Commission highlighted the need for coordination of PIFC Implementation with other ongoing reforms in the areas of Public Financial Management and Public Administration. The Commission also noted the ongoing reform activity of the Office of the Auditor General.

The meeting was co-chaired by the Ministry for European Integration and the European Commission Directorates-General for Economic and Financial Affairs, and Enlargement. DG Budget and Eurostat also participated in the meeting.

Background information:

The SAP Dialogue is a framework under which the European Commission and the Kosovo administration regularly discuss technical and policy issues in relation to the European agenda.  The SAP Dialogue monitors and accompanies Kosovo’s delivery on reforms, and identifies how the EU can assist in this process. Sectoral and plenary SAP Dialogue meetings are co-chaired by the European Commission and the government. Each meeting results in jointly agreed follow-up actions to be taken by the Kosovo authorities.

There are seven areas covered in sectoral meetings and they follow closely the format of the dialogue that the EU has with other candidates and potential candidates. These seven sectors are:

– Justice, Freedom and Security
– Innovation, Information Society, Social Policy, Education and Culture
– Trade, Industry, Customs and Taxation
– Internal Market, Competition, Consumer and Health Protection
– Agriculture, Fisheries, Forestry, Food Safety
– Transport, Environment, Energy, Regional Development
– Economic and Financial Issues, Statistics

The time between the meetings allows for the implementation of the recommendations and agreed follow-up actions. A plenary meeting, where the reform priorities will be discussed, is expected to take place in July 2015.