UNMIK-JIAS Fact Sheet
Kosovo Consolidated Budget

The Kosovo consolidated budget for 2000 was the first prepared for a full year since the start of the UN interim administration. It provides for recurrent expenditures of DM 562 million. The major portion (DM 362 million) is financed from taxes, fees and user charges. The remaining DM 200 million comes from donor grants. Alongside, all public investment costs will be separately financed through the donor community.

Guiding principles for the budget are:

• Promoting stability. basic support for essential government functions (education, health, public protection, social assistance and utility services) at a sustainable level.
• Improving compensation. switching from the stipend scheme prevailing in 1999 to salaried remuneration of public employees, thereby raising average earnings by 50 per cent (to over DM 270 per month).
• Assisting the most needy. 20 per cent of the total budget funds a cash assistance programme.
• Strengthening the domestic revenue base-improved domestic revenue collection from customs and tax administration.
• Ensuring sustainability. constraining public sector staff levels through introduction of modern techniques for providing services more efficiently.
• Meeting donor targets. consistency with the overall budget framework agreed at the Brussel donor conference in November 1999.

The budget document divides revenue and expenditure into three areas: general government, municipalities and public.

General government

The General Government portion of the budget reflects most activities carried out on a Kosovo-wide basis on behalf of its citizens. Expenditure on the main functional groups of services is set out in the table below. The main sources of revenue are donor grants (47 per cent), sales tax (25 per cent), customs revenue (9 per cent), other taxes (8 per cent), fees for vehicle licences and telecommunications operations (6 per cent) and excise taxes (5 per cent).

Function	Expenditure(DM million)	Share (Per cent)
Education	116.2	28
Health	81.1	20
Social assistance	82.5	20
Public order	35.1	8
Energy subsidy	22.7	5
Kosovo Protection Corps	20.7	5
Municipalities	19.0	4
General public services	14.6	3
All other	31.3	7
Totale expenditure	423.2	100

Municipal budgets

Municipal budgets are principally sourced by a DM 19 million grant from the General Government budget. In addition, municipalities are expected to generate a further DM 3 million from their own fee charges. The idea of the grant is for the central administrative authority to provide basic support for municipal functions, while allowing the municipalities themselves to determine local priorities.

While each municipality has a separate budget, its share in the total grant is determined by an instruction issued by the Co-heads of the Central Fiscal Authority. This share is determined in turn by a formula with three elements:

• Approximately DM 1 million to each muncipality to cover minimum base costs for core functions.
• Nearly DM 18 million distributed on a weighted population basis-currently favouring Pristina with 50 per cent addition to account for its additional post-conflict population level.
• DM 2 million unallocated and available for addressing unforeseen problems.

Public enterprises

Publicly-owned firms supplying services (aviation, bus and rail transport, water and electricity, garbage collection, public heating, postal and telecom services) are to be funded largely from user charges estimated at DM 135 million. Additional subsidies for electricity generation, garbage collection, public heating and water supply are provided by a grant of DM 31.7 million from the General Government budget.

Three services are expected to generate surpluses: telecom, buses and railways. Aviation should break even. Postal services, which is without subsidy, is foreseen to make losses which will be covered by the telecom surplus.

Balancing the budget

A significant risk to the fiscal balance for 2000 lies in the need for subsidies in excess of the DM 22.7 million already foreseen. UNMIK continues to seek ways to improve revenue collection, including payments for services. Meanwhile a mid-year review is planned in order to assess tax implementation, revise forecasts for 2000 and develop preliminary forecasts for 2001. General economic and fiscal policies will also be developed as a foundation for integrating the operating and investment budgets in 2001.