This publication analyzes the size and structure of the Kosovo budget and looks at the prospects for the budget to be sustainable in the medium term. To date, fiscal policy has focused on activating essential services and building up capacity to tax and administer budget funds. Capital expenditures for the large reconstruction program have been kept separate from the current expenditure budget and treated as a standalone component of donor support. The initial goals of fiscal policy have been achieved in quick time: budget systems are in place, revenue is being collected, there is a clearer understanding of expenditure needs, and the reconstruction program is in high gear. The challenge now is to develop tax and expenditure policies to ensure that public services are comprehensive, efficiently provided, and financed for the most part from locally generated resources.