GAP: The effect of COVID-19, budget revenues 28 % less

The GAP Institute has released the report “impacting the COVID-19 pandemic in the Kosovo budget, where it says that in March-May, when most private sector and public activities in Kosovo were halted due to the COVID-19, budget revenues were for 133m euros (28.2%) lower in the same period of the year before, while spending for 4.7m euros (1%) lower.

According to GAP, the aim of this report is to present the impact of the crisis caused by the pandemic COVID-19 in revenues, spending and fiscal deficit of 2020, as well as the restrictions and opportunities the Kosovo Government has for addressing the budgetary crisis.

“in the March-May 2020 period, when most private sector and public activities in Kosovo were halted due to COVIID-19, budget revenues were for 133m euros (28.2%) lower in the same period of the year before, while expenditures for 4.7m euros (1%) lower. The decline of revenues in addition to increased spending will result in budget deficit rules for the first time. Despite the deficit increase, Kosovo is expected to have the lowest level of public debt in the region. Even though spending growth has been planned, the category of capital investments as a category that helps faster economic growth is expected to fall significantly compared to planning. While, mainly because of the need for assistance to the private sector, there is a significant increase in subsidies. Although necessary, increasing subsidies as one of the least legally regulated categories could create room for abuse of public money. To address the economic and social situation created as a result of measures to halt and limit the work of most of the businesses in the private sector, the Government of Kosovo approved a Fiscal Emergency Pack worth 179.6m euros. This package mainly contains short-term measures to address problems caused by COVID-19. In the 2020-2023 governing programme, the government of Kosovo has also provided a second package for economic recovery, where within two years (2020-2021) plans to mobling about 1.2 billion euros”, the report says.

GAP stresses that due to legal restrictions, the package of fiscal emergency and recovery will not be fully managed without the involvement of the Kosovo Assembly.

In addition to the need for approval of the Assembly for any transfer exceeding 25% of a budget division of the relevant institution, the inclusion of the Assembly will also be needed for the adoption of new credit agreements with 2/3 of MPs' votes. In the event of defaulting on credit deals, public spending will fall and this will affect further economic decline”, the report says.