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  • North Macedonia, Republic of x
  • Macroeconomics: Consumption; Saving; Wealth x
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Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

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.

Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

Since the end of the conflict in Kosovo-a province of Serbia in the Federal Republic of Yugoslavia-in June1999, IMF staff have been providing technical assistance to help the province rebuild its economy. The assistance has focused on setting up taxation and budgetary institutions, a payments and banking system, and a statistical framework. The IMF staff has also provided general macroeconomic policy advice, especially on budget formulation, which is the main focus of this publication. The IMF’s technical assistance has been carefully coordinated with that of the World Bank and donor agencies.

Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

The United Nations has been in charge of administering Kosovo since the end of the conflict that took place in March-June 1999. The UN’s mandate comes from Security Council Resolution 1244 (SC1244), which gives the provisional authorities (the UN Mission in Kosovo, or UNMIK) powers to pass regulations that override Yugoslav law. Although local Kosovars are consulted closely in the decision-making process, there is no recognized indigenous government. However, municipal elections in October provided a democratic foundation for local administrative structures.

Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

Given Kosovo’s unique circumstances, fiscal policy currently takes a rather rudimentary form. UNMIK had to start from scratch in designing a tax system, developing a budget, and creating the institutions to implement its policies (Box 2). At present, Kosovo has a basic tax system that relies mostly on tax collection at the border (sales tax as well as customs and excises), while the structure of expenditure has yet to become fully comprehensive. In the absence of domestic financing instruments, donor grants are financing about half of the recurrent budget, as well as all capital outlays.

Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

Although technical assistance from the IMF’s Statistics Department is helping to define a program to regularize the collection and reporting of statistics, reliable estimates will depend on data from upcoming surveys. Until then, estimates of the size of the economy of Kosovo are based on partial information, potentially unreliable observations, and some educated guesswork.

Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

The main medium-term scenario summarized in Table 7 depends on assumptions about macro-economic developments and policies on taxes and expenditures. The scenario treats Kosovo as a continuing autonomous economic entity.

International Monetary Fund. European Dept.
This Selected Issues paper on Former Yugoslav Republic (FYR) of Macedonia investigates the macroeconomic impact of remittances on long-run external sustainability and growth. The paper presents stylized facts pertaining to the characteristics of remittances in Macedonia, highlighting their countercyclicality and importance in sustaining the purchasing power of domestic agents. The paper reviews to help set up a theoretical framework for assessing their macroeconomic impact, highlighting the possible risk of “Dutch disease” developments. The paper uses a Bayesian vector autoregression (BVAR) model to empirically investigate both hypotheses of countercyclicality and Dutch disease effects and puts forward a few policy options that may be explored to better harness remittances to support investment and long-term growth. The paper suggests that strong political engagement in support of diaspora projects is a key point. The mobilization of diaspora savings for private and public investment would maximize the long-term benefits of remittances.
Mr. Robert J. Corker, Ms. Dawn Elizabeth Rehm, and Ms. Kristina Kostial

Abstract

Kosovo needs to make budget decisions with a clear view to achieving a sustainable fiscal position. The objective should be to avoid the need for sharp expenditure adjustments in the future, when external financing sources are likely to dry up. Although donor support for reconstruction might continue for several years, as it has in Bosnia and Herzegovina, donors have repeatedly stressed that support for recurrent expenditure will need to decline substantially in the next few years. In the short term, this will constrain spending options as increases in tax revenue replace declining donor grants. In the longer term, a fully sustainable fiscal position would require all expenditures—including the three big off-budget items, investment, defense, and debt service—to be financed mainly from local revenues and, perhaps, a modest level of borrowing. Moving along a path that prepares for such an eventuality is entirely consistent with the “considerable autonomy”principle underlying the UN’s SC1244.