Ministry of Economy and Finance Kosova Public Expenditure Management Challenges in ECA/PRSP Countries Warsaw, Poland. February 2005 Ministry of Economy and Finance Kosova

OVERVIEW OF THE MFE History Size and composition Staff size Budget includes PISG/ Reserve Organizational structure

1. Achievement in PEM Implementation of the LPFMA Creation of unique and transparent budget processes for all budget organizations of KCB. Monitoring of budget spending electronically through Free Balance software. Certification of Municipalities on financial management.

2.Achievements in PEM Financial Reporting Required by LPFMA (revenues and expenditures). Implementation of the new Public Procurement law. A move from multi year commitment to annualized cash based expenditure appropriations.

Need and purpose for an MTEF Improve transparency and facilitate decision-making, especially in regards to subsidies to Public Owned Enterprises Improve both the quality and amount of public spending on education, health and infrastructure Implement a managed approach to fully utilizing the Government’s retained earnings by 2008 Contain government expenditure to respect the financing constraint Facilitate fiscal stability

Medium Term Budget Framework 2004-2007 Summary of MTBF utilizing the pool of retained earnings (ie the government cash bank balance) in order to finance planned differences between revenues and expenditures in each year. A move from multi year commitment to annualized cash based expenditure appropriations to provide funds in the specific year that they will be spent. This will reduce the large carry forward of commitments and cash surpluses that have built up over the last few years. A reduction in public expenditure on good and services as recommended by the International Monetary Fund (IMF). Initial steps to integrate Public Owned Enterprises (POEs) and donor aid into the budget including introducing a dividend for the PTK in 2005 and other profit generating POEs from 2006-08 as is the practice in developed countries

BUDGET PROCESS Consistent with international standards History 2000-2005 Calendar Institutions (Budget Organizations, Budget Commission, Grants Commission)

Budget Cycle

Budget Process Challenges, Accomplishments, and Next Steps To change from ad-hoc activities by new institutions, and establish a controlled process managed in a consistent way To balance the divided power and varying spending priorities To establish realistic expectations and conduct rational actions Cashflow management

Next Steps Control size of civil service and social subsidy programs Determine maintenance level of G&S spending Focus on results-oriented Capital spending Require cost estimates for all proposed laws Stress training for Budget Organizations and Assembly

Economic and Budget Policy Issues Facing The Government How to develop the missing pieces Methods to increase revenues and manage public spending Budget consolidation POE management Relationship with SRSG and Reserved Powers

Medium Term Fiscal Strategy

MINISTRY OF ECONOMY AND FINANCE MINISTRIA PËR EKONOMI DHE FINANCA Thank You