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Speech, Avdullah Hoti, SIGMA, Paris, 4 December 2015


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Speech by Avdullah Hoti, Minister of finance, Kosovo, made at the regional conference on Public Administration Reform Challenges in Western Balkan Countries held at the OECD in Paris, 4 December 2015.

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Speech, Avdullah Hoti, SIGMA, Paris, 4 December 2015

  1. 1. 2 Rue André Pascal 75775 Paris Cedex 16 France Tel: +33 (0) 1 45 24 82 00 Fax: +33 (0) 1 45 24 13 05 This document has been produced with the financial assistance of the European Union. It should not be reported as representing the official views of the EU, the OECD or its member countries, or of beneficiaries participating in the SIGMA Programme. The opinions expressed and arguments employed are those of the author(s). This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. *This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence. Speech by Avdullah Hoti Minister of Finance of Kosovo* « Ensuring medium-term financial planning aligned with policy priorities » Regional ministerial conference on public administration reform challenges in Western Balkan countries Paris, France 4 December 2015
  2. 2. 2 Honorable Ministers, Distinguished guests, Allow me to first thank SIGMA and OECD as organizers of this Summit and all participants for being here today to discuss and share views on important matters related to Public Administration Reform. I am delighted to be part of this Conference. I would like to take this opportunity to talk for few minutes about Public Financial Management, Public Governance system and the ongoing Public Administration Reforms The timing of this conference is very important, in particular for Kosovo who recently singed the Stabilization and Association Agreement with the European Commission. This Agreement requires that we have a capable public administration - so I trust that this forum will contribute to productive recommendations for an improved and more efficient public administration in our countries. In this context, Public Administration Reform has been featured as one of the top-priorities in all strategic documents of my Government, such as Government Program, Medium Term Expenditure Framework and National Economic Reform Programme. I have carefully reviewed the Baseline Measurement Report for Kosovo and I should say that this document fairly presents the achievements made so far on the area of Governance and Public Administration, and the challenges ahead. Let me focus on the progress we have made on ensuring medium-term financial planning and how that is aligned with policy priorities. Proper and disciplined fiscal and financial planning is key to ensuring long-term stability of public finances In addition, given the competing needs and priorities of any government, in particular for developing countries, it is of outmost importance to ensure that as part of fiscal planning, any public money is spent in the most efficient way, by focusing in the highest productive investments. And this is what we have tried to do over the past year, and I am delighted to say that we have managed to be relatively successful on this particular area. We have improved significantly the process of developing strategic documents, which clearly define the main strategic priorities of Government. Our main policy and expenditure document – the Medium-Term Expenditure Framework, which serves as basis for developing the annual Budgets, has seen marked improvements over the years. Owing to the donor’s assistance in this area, we have managed to build relatively strong capacities within the Government, which today is capable of developing this document in very efficient way The process and the content have improved considerably and we plan to further invest in our people and institutions to improve further.
  3. 3. 3 Starting January last year, we managed to produce the first National Economic Reform Program and submit to the European Commission. This is a very important policy document for our country, and together with the new government program, it fully reflects the commitment of my Government for maintaining and further strengthening the fiscal discipline and structural reforms to release the growth potential of our economy. With the support of European Commission, we are about to finalize the National Development Strategy, as a longer-term vision of our strategic orientation. With this, we will close the cycle of developing strategic policy documents, which will be implemented through annual budgets of Government. In addition, we have in parallel developed a new Administrative Instruction and Manual to further enhance the process of conducting Budget Impact Assessment of any new Government decisions. This is extremely important to make sure that for any new Government initiatives, a well- defined process for costing is in place, and that any Government decision are taken based on fully disclosed information on cost-implications of such initiatives. This improved process and methodology has improved the quality of inputs coming to government and it has also contributed to improved fiscal transparency. I wanted to also mention another very important element into this equation. Macroeconomic and in particular fiscal projections form the basis for sound, transparent and accountable public financial management and long-term fiscal stability. In this connection, Kosovo has made marked progress, by removing any political interferences in such economic and fiscal projections, and allowing for technocrats to do their work, based on very sound and reliable economic and fiscal assumptions. We all know that quite often, fiscal projections to a large extend are driven by expenditure needs of Government; however, this is something which Kosovo, in particular during last year and this year, has improved by ensuring that budget revenue projections are based on credible assumptions and that those projected revenues are used for productive spending. Let me mention one more thing, before moving to few challenges we face. Providing accurate, standardized, clear and timely information to public, is critical for a transparent and accountable public finances. In this, we have done a good progress by improving financial reporting, and involving the public at every stage of the budget cycle, starting from designing strategic policies, to budgeting, execution and monitoring. Now, going forward, we are working to maintain good practices and further improve on a number of areas.
  4. 4. 4 One very important element is to introduce Performance based management indicators in budgeting. This will ensure that public money is spend in the most efficient way, to deliver quality services and products to citizens. Traditional line budgeting, where only inputs are used to make decisions, do not provide enough information on the impact for citizens. Thus linking budget planning and performance measurement is crucial to addressing long-term effects and outcomes, and that choices are made, based on measurable impact, as opposed to inputs. We have already started to introduces such practice into our budgeting process; however, a lot remains to be done and we would be happy to listen to any good practices here from other countries. Some relatively good progress has been achieved in monitoring of budget execution; however, more remains to be done to ensure that any public money is spent in the most efficient way. Out Treasury is improving its monitoring capacities; we are reviewing and adopting the internal control systems to be able to better monitor budget execution. However, one challenge in this respect is to find an acceptable balance between too much and too little fiscal decentralization. Another point I wanted to raise here is the need to increase our planning capacities for public investments. In discussions and negotiations with IMF, we have managed to relax our fiscal rule, to allow for more investments in public projects; yet, we are still lacking human capacities to be able to properly select good quality projects and be able to execute on time. With the support of the donor community, including the expected Technical Assistance from IMF, we are investing time and efforts to improve our planning and execution capacities, so that in future years, the number and size of quality and productive public investments increases significantly. For those not very familiar with our fiscal position, I should mention that Kosovo’s public debt is very low and there is room to finance public investments, while maintaining debt-to-GDP ratio well below the acceptable levels of indebtedness. Let me also say that to improve the structure of our public expenditures, very recently we have amend the Law on Public Financial Management and Accountability, to introduce a legally binding rule on future increases in wage bill of the Government. This rule will ensure that future wage increases in public sector are in line with fiscal and economic capacities of the country; provide predictability and improve the competitiveness of our economy. With this, I will finish here and remain available to provide additional contribution to this Forum. Thank you.