2002 Kosovo Budget Overview

THE NEW KOSOVO GOVERNMENT 2002 BUDGET TABLE OF CONTENTS I. INTRODUCTORY CHAPTERS 1. 2002 Kosovo Budget Overview Revenues ................................................................................................ 2 Kosovo General Budget ....................................................................... 5 Municipalities and Devolution ……………………………................. 12 Public Enterprises …………………………………………................ 14 Public Investment Program ................................................................. 16 Political and Administrative Governance in Kosovo .......................... 18 Conclusions: Future Policy Priorities ................................................. 22 Appendices Kosovo Consolidated Budget Table .................................................... 25 Key Political and Budget Events of 2001 and 2002 ............................ 26 Roles/Responsibilities of Key Economic and Fiscal Institutions ........ 28 2. Macroeconomic Outlook Historical Background ......................................................................... 29 Macroeconomic Environment ............................................................. 30 Current State of Kosovo’s Economy ................................................... 31 Macroeconomic Policy priorities ........................................................ 31 3. Revenues Introduction ......................................................................................... 41 VAT ..................................................................................................... 43 Excise Taxes ........................................................................................ 44 Customs Duty ...................................................................................... 44 Profit Tax ............................................................................................. 45 Personal Income Tax ........................................................................... 45 Property Tax ........................................................................................ 46 4. Kosovo 2002 Intergovernmental Budget Background ......................................................................................... 47 Municipal Revenues ............................................................................ 47 Funding Devolved Primary Health Care Activities Across Municipalities ........................................................................ 49 Funding Devolved Primary, Secondary, Pre-Primary and Pre-school Activities Across Municipalities .............................. 50 The General Grant ............................................................................... 52 Municipal Property Taxation and User Charges .................................. 52 Funding Flexibility under the New Revenue System .......................... 53 ii II. THE NEW KOSOVO GOVERNMENT 1. Provisional Self-Government Institutions – Program Overviews Introduction ............................................................................................. 58 Assembly, Office of the President, Office of the Prime Minister, Ministers and Ministerial Offices ............................................................ 60 Ministry of Finance and Economy .......................................................... 64 Ministry of Public Services....................................................................... 67 Ministry of Agriculture, Forestry and Rural Development ..................... 72 Ministry of Trade and Industry ............................................................... 78 Ministry of Transport and Communications ........................................... 81 Ministry of Health, Environment and Spatial Planning .................... 86 Ministry of Culture, Youth, Sports and Non-Resident Affairs ............... 92 Ministry of Education, Science and Technology .................................... 95 Ministry of Labor and Social Welfare..................................................... 102 2. UNMIK Reserved Powers Institutions – Program Overviews Central Fiscal Authority ........................................................................ 107 Directorate of Administrative Affairs ................................................... 110 Directorate of Civil Protection .............................................................. 113 Kosovo Police Service (KPS) ............................................................... 119 Department of Justice ............................................................................ 123 Kosovo Correctional Services ............................................................... 128 Directorate of Rural Affairs .................................................................. 131 Directorate of Infrastructure Affairs ..................................................... 136 Radio Television Kosovo (RTK) ........................................................... 139 Independent Media Commission ........................................................... 141 Banking and Payment Authority (BPK) ................................................ 143 Kosovo Ombudsperson Institution.......................................................... 145 Joint Advisory Council on Legislative Matters (JAC/LM) ................... 147 Community Affairs Office .................................................................... 149 Public Utilities Regulatory Commission ................................................ 151 Audit General Office ............................................................................. 153 Kosovo Pensions Savings Trust ............................................................ 154 3. Kosovo Public Enterprise Sector .............................................................. 156 4. Contributors List ........................................................................................ 162 5. 2002 Budget Regulation ............................................................................. 163 6. 2002 Budget Schedules ............................................................................... 170 iii GLOSSARY BPK Banking and Payments Authority of Kosovo CAM-K Customs Assistance Mission in Kosovo CEE Central Europe and Eastern Europe DM Deutsche Mark (1 Euro = DM 1.95583) EFC Economic Fiscal Council EU European Union FRY Federal Republic of Yugoslavia FYROM Former Yugoslav Republic of Macedonia GDP Gross Domestic Product GNP Gross National Product HCIC Humanitarian Community Information Center IAC Interim Administrative Council IDCA International Donor Community Analysis IPH Institute of Public Health IT Information Technology JIAS Joint Interim Administrative Structure KCB Kosovo Consolidated Budget KGB Kosovo General Budget KEK Kosovo Electric Company KFOR Kosovo International Peacekeeping Force KPC Kosovo Protection Corps KPS Kosovo Police Service KTA Kosovo Trust Agency KTC Kosovo Transitional Council OSCE Organization for Security and Cooperation in Europe PISG Provisional Institutions of Self-Government PIP Public Investment Program PTK Post and Telecommunications of Kosovo PUSP Public Utility Service Provider PURCK Public Utility Regulatory Commission of Kosovo RTK Radio-Television of Kosovo SME Small and Medium Enterprises SRSG Special Representative of the Secretary General UNHCR United Nations High Commission for Refugees UNMIK United Nations Interim Administration Mission in Kosovo UNSCR United Nations Security Council Resolution VAT Value Added Tax WB World Bank WHO World Health Organization iv 2002 KOSOVO BUDGET OVERVIEW Introduction The 2002 Budget marks an important stage in each phase of transition for Kosovo. Beginning in 2002, Kosovo will be governed by a newly-elected Assembly, a President and Prime Minister and will have 91 Ministries serving as provisional institutions of self- government to carry out most government functions such as education, health and social welfare. The 2002 Budget will support important initiatives to expand Kosovo’s private sector to continue building a market-based economy in years to come. Additionally, about 93% of the 2002 Budget is funded by local revenues marking an important transition to a budget fully funded by domestic revenues. Funding for major reconstruction efforts will remain at about the 2001 level, taper off by 2004 as donor funding declines and focus shifts to more domestic funding for future capital investment needs. By year-end 2003, the Kosovo Budget is expected to be fully funded by local revenues and to have fully integrated operating and capital spending. For 2002, the Kosovo General Budget totals Euro 374.1 million, representing a 30% increase (+Euro 85.9 million) from the revised 2001 Budget. Although the increase appears expansionist considering the Kosovo economy’s overall size, most of the increase is for implementing the new Kosovo Government institutions and associated new spending policies. The Kosovo General Budget discussed throughout this Overview refers to the 2002 Budget which includes the central government (provisional institutions of self-government and reserved functions) and municipalities. This Overview also briefly references the Kosovo Consolidated Budget, which consists of the Kosovo General Budget and the public enterprises that receive central budget transfers, to offer a complete look at the state of the public sector. This 2002 Budget Overview includes eight sections: 1. Introduction 2. Revenues 3. Kosovo General Budget

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