Republika e Kosovës Republika Kosova – Republic of Kosovo Qeveria – Vlada – Government Ministria e Financave - Ministarstvo za Finansija - Ministry of Finance Thesari i Kosovës – Trezor Kosova - Treasury of Kosova ______________________________________________________________________________ Semi-annual financial report Budget of the Republic of Kosovo For the period 1 January – 30 June 2018 Address: Government Building, 10th floor, str. ”Nëna Terezë”- 10000 Prishtina-Kosovo Phone/Fax: +383 38 200 34 005/+383 38 212 362 www.rks-gov.net Contents 1. Introduction ........................................................................................................................... 3 2. Receipts and payments for January – June 2018 and comparisons with previous years ..... 6 3. Budget report for period January - June 2018 by months .................................................... 9 4. Kosovo Customs revenues for January – June 2018 ...................................................... 10 5. Revenues from Tax Administration of Kosovo for January - June 2018 ............................. 11 6. Municipality’s own-source revenues for January - June 2018 ............................................ 13 7. Property tax for January – June 2016/2017/2018 .............................................................. 14 8. Expenditures for January – June 2018 ................................................................................ 12 9. Payments from donor designated grants for January – June 2018 .................................... 13 Annex 1: Data on transfers from the reserve fund .................................................................. 15 Annex 2: Employment data ..................................................................................................... 16 Annex 3: Budget and Payments according to Budget Organisations ...................................... 18 Annex 4: Expenditure from the fund 22 for January-June 2018 ............................................. 29 Annex 5: Expenditures from fund 33 of NA and PAK…….………..............................................28 Annex 6: Payments according to Article 39.2 of LMFPP and court decisions ........................ 30 Annex 7: Subsidies for public enterprises for January – June 2018 ........................................ 32 Annex 8: Capital projects for January-June 2018 ...................... Error! Bookmark not defined. 2 1. Introduction This report contains a summary of main trends of budget revenues and expenditures during the six-month period of 2018. The report contains summarising analyses for the relevant period, presentation of revenues by collecting institutions at the central and local level, details on revenues by type of taxations, as well as comparisons with the previous periods and monthly projections. 1.1. Revenues Performance Budget revenues amounted to EUR 815 million (including dedicated revenues and one-off funding from KPST), by marking an increase of about 6%, corresponding to EUR 45.27 million more in comparison to the first six months of the previous year, by executing 44% of the foreseen annual plan. This growth came due to the increase of regular tax revenue collection. The trend of tax revenues is estimated to be due to the performance of the private sector, continuous improvement of doing business environment, the volume of public spending and the activities of the revenue collection agencies. Tax revenues collected from Kosovo Customs reached gross amount of 504 million euros, by marking an increase of about 13 million, or 2.5% more compared to the same period of the previous year. Tax revenues collected by the Tax Administration of Kosovo have reached the gross amount of EUR 219.86 million (including one-off revenues from the collection of tax debt), expressed in value of about 27 million or 14% more compared to the same period of 2017. Non-tax revenues have had a lower execution of 5% compared to the previous year due to the decline of non-tax revenues from the local level for about EUR 2.2 million or 10% and the royalty that was lower for about EUR 3.6 million or 23%. The receipt from borrowing has been 51 million euro in the first half of the year, and it has realized 24% of the planned. Compating to the same period of the last year, execution is less than for 83.46 million euro, due to the fact that during 2017 within foreing debt was disbursed from IMF funds in 100 million euro, whole internal borrowings has been increased by 17 million euro during reporting period. 1.2. Performance of expenditures Budget expenditures amounted to EUR 844.12 million (including interest payment), marking a 10% increase, corresponding to EUR 74.64 million more in comparison to the previous six- month period, by executing 94% of the plan for this period. This increase was driven by the higher execution of capital investments by 15%, as well as the increase of current expenditures by 9% according to budget categories: goods and services increase by about 12%, subsidies and transfers increased by about 10%, as well as increase of salary expenditures by 7% as a result of wage increase. o Expenditure for wages and salaries amounted to EUR 293.82 million during this six- month period, thus achieving the execution rate at 50% compared to the total annual value budgeted for this category. The salaries bill during the reporting period represents 3 an increase of 7% or around EUR 19.65 million more compared to the salaries bill in the same period of 2017. This increase is mainly attributed to the increase of wages by 4% for all public servants in accordance with the fiscal rule of salaries according to the Law on Public Financial Management and Accountability (Article 22/c) 1 and the implementation of the Government's decision to increase the salaries of some government sectors, starting in June, but with retroactive effect according to the government decision. o Expenditures for goods and services (including the utilities) marked an increase of EUR 104.36 million, thus achieving the execution rate at 41% compared to the total annual value budgeted for this category (including EUR 12.27 million in utilities), or 10% increase compared to the same period of 2017. o Expenditures for subsidies and transfers amounted to EUR 253.6 million, representing an increase of EUR 22.6 million, thus achieving the execution rate at 48% compared to the total value budgeted for this category or 10% more compared to the same period of 2017. This growth came as a result of the increase of social transfers, respectively social assistance and new schemes with government decision, as well as minor increase in existing categories. On the other hand, other subsidies have decreased by 5 million euros or 11% compared to the previous period. o Capital expenditures amounted to EUR 183.08 million, representing an increase of EUR 23.7 million, thus achieving the execution rate at 26% compared to the total annual value budgeted for this category or about 15% more compared to the same previous period. o Expenditures for state borrowing (payment of interest and principal) amounted to EUR 18.15 million, thus achieving the execution rate at 31% compared to the total value budgeted for this category, thus marking a decrease of 58% compared to payments for this category during the same period of 2017. As a conclusion, the temporary calculated deficit for the reporting period of EUR 51.8 million (the primary deficit of EUR 42.5 million and interest payment of EUR 9.3 million), which represents about 0.78% in relation to GDP projected for 2018, the rate that falls within the fiscal rule 2 under Article 22/A of the Law on Public Financial Management and Accountability (LPFMA). 1 Wage increase in line with nominal GDP growth, based on the legislation on the fiscal rule of wages realized for the first-time in the 2018 budget. 2 Temporary calculation the deficit, subject to adjustements by the end of the year for source funds 22 4 1.3. Balance of funds on 30 June 2018 The balance of funds on 30 June 2018 was EUR 373.26 million. Initial balance of funds to the Budget of Republic of Kosovo on 1 January 2018 was EUR 357.76 million. As a result of higher receipts than payments for the period January – June 2018, the balance of funds increased for EUR 15.5 million (including the transit account), or 3% more compared to the previous period. As a result, the overall balance of funds in amount of 373.26 million euro compared to GDP planned for the year 2018 is 5.62%. Detailed disclosures about revenue and expenditure are presented in the following tables of this semi-annual report for 2018. 5 2. Receipts and payments for January – June 2018 and comparisons with previous years 2016 2017 2018 Difference Description in millions of Euros (2018/2017) 1. TOTAL RECEIPTS 841.78 907.57 869.55 -4% 1.1 Budget revenues 736.72 769.60 814.87 6% 1.1.1 Tax revenues 642.50 662.99 705.29 6% 1.1.1.1 Direct Taxes 116.36 119.02 133.83 12% Corporate Income Tax 44.06 39.80 44.02 11% Personal Income Tax 58.39 67.14 76.04 13% Property tax 11.05 10.79 12.04 12% Other direct taxes 2.86 1.29 1.74 35% 1.1.1.2 Indirect taxes 545.61 573.64 600.57 5% Value Added Tax VAT 306.98 333.16 361.05 8% Customs Duty 62.55 55.94 55.07 -2% Excise 175.98 184.22 184.16 0% Other indirect taxes 0.09 0.32 0.29 0% 1.1.1.3 Tax Returns (19.46) (29.67) (29.11) -2% 1.1.2 Non-tax revenues 94.21 90.95 86.00 -5% Taxes, charges and others by BOs of Central Government 57.44 49.57 50.05 1% Taxes, charges and others by BOs of Local Government 18.96 21.55 19.31 -10% Concession fee 3.20 3.71 4.15 12% Royalties 14.61 16.12 12.49 -23% Return of loans by publicly-owned enterprises/1 - 8.19 6.48 0% Dedicated Revenues - 7.47 7.13 -4% One-off financing from KPST - - 9.97 0% 1.2 Receipts from financing 105.06 137.97 54.68 -60.4% Borrowing 101.72 134.37 50.91 -62% Internal borrowing 60.56 25.55 42.56 67% External borrowing including sub-borrowing/2 41.16 108.83 8.35 -92% from which sub-borrowing from POE 3.11 4.12 4.20 2% Receipts from donor designated grants 3.34 3.60 3.77 5% 2.