By Linda Karadaku
A pair of missteps in 2011 has prompted the upcoming meetings between Kosovo and the IMF. The Fund opted to interrupt its 18-month stand-by arrangement signed with the country because elements of the 2011 budget, particularly the large increase in the wage bill, deviated from programme commitments.
Then, bidding for the expected privatisation of the state-owned Kosovo Post and Telecom (PTK) had to be halted amid corruption charges.
Daily Koha Ditore reports that Prime Minister Hashim Thaci, Finance Minister Bedri Hamza and Central Bank Governor Gani Gërguri sent a letter to the IMF in mid-December, saying their main hope to finance the deficit stands in the 75m euros it is expected to take from the Pensions Trust.
According to the letter, the PTK’s privatisation may not happen this year either. “For that, the government has been committed to set aside a fund of 150m euros as a liquidity reserve, money that would be taken out of financial cuts in some sectors,” the daily reported.
“The prolongation of the process … will not have a negative impact on the realisation of the projects planned for 2012, and it does not have an impact on the salaries either. It influences only the budget reserve, which will be bigger if the PTK is privatised and smaller if it is not,” Finance Ministry spokesman Muharrem Shahini told SETimes.
Economic analyst Ibrahim Rexhepi insists the sale is indispensable. “This is not much supported in the logic of the market and the competition, but in the need to keep the budget stability. The fund of 60m euros has been proposed only for budget security, in case no money comes from the PTK sale or the sale of Kosovo Power Company (KEK) distribution,” Rexhepi told SETimes.
He believes that if the PTK sale fails again, the problems will loom much larger. “The budget reserve can be spent and then we can talk about deep cuts in the social aspect as well. That’s why it has to be sold in 2012,” he added.
Kosovo media reported that among the measures under consideration are salary cuts and cuts in the subventions (subsidies) of the public owned companies.
“The government has promised the IMF that it will cut 10m euros from the expenses for salaries, 15m euros from KEK subventions and it will benefit some 13m euros from the increase of the excise value for cigarettes and increase of the VAT property value,” Koha Ditore reported.
But Shahini said there will not job cuts in the public administration.
Marash Kukeli, an agriculture expert, says the budget cuts will be felt. “They would affect the standard of living directly and indirectly; they would affect our lives if there are reductions of the investments in infrastructure, reductions in the subventions for the agriculture and less job openings due to those cuts,” Kukeli tells SETimes.
It “would be better to cut the salaries of the deputies, ministers”.
Rexhepi says there is not much space for big budget cuts “because they would be very negatively reflected in the social aspect”.
“Sixty million euros make 4.6% of the budget income, or 4% of the total expenses. Considering that this is a small percentage, it is possible to secure that money by giving up some luxuries that the ministers and deputies enjoy, by rationalising the expenses for goods and services, and for some projects of capital investments, especially in the local infrastructure, in which there are a lot of investments, but their impact is not important,” Rexhepi told SETimes.
That way, he says, the budget reserve fund can be secured without touching salaries and pensions.