Skopje Highway Risks Busting Kosovo’s Budget

By Lavdim Hamidi

Kosovo’s government has announced a major new highway to Macedonia, despite its existing financial commitments to finish building the country’s first highway to Albania.

Earlier this month, the cabinet announced that it planned to press on with a scheme to build a highway from Pristina to Skopje, capital of Macedonia.

The new highway will be 55km long and will have two tunnels. The longest tunnel will be built in Kacanik, 2.2 km meters long.

The American-Turkish consortium Bechtel Enka is currently constructing Kosovo’s first highway, to Albania, at a cost of between 700 million euro and 1 billion euro.

Experts warn that the new highway could further imperil the country’s rocky finances.

Until 2007, Kosovo’s budget was characterised by budget surpluses of more than 7 per cent, but in 2010 the budget deficit was 2.6 per cent, largely because of increased capital expenditures on the Albania highway. This year’s deficit is expected to reach 5 per cent of the GDP.

Because of increased budget expenditure, and in particular spending on the highway and increased salaries for civil servants, the IMF halted its Stand-by Arrangement with Kosovo, depriving the country of 150 million euros in grants and loans.

An IMF assessment of Kosovo said: “New spending initiatives need to be costed thoroughly, and their accommodation requires higher revenues or expenditure cuts elsewhere.

“Importantly, the government plans another highway from Pristina to Skopje/Macedonia, for which a sound financing plan is an indispensable prerequisite.”

Lah Nitaj, the advisor to the Minister of Infrastructure, Fehmi Mujota, told Balkan Insight that a tender would be announced in July to construct the new road.

Construction of the new motorway is also foreseen in the Ministry of Finance’s long-term spending plans, where it is noted that work on “Route 6” is supposed to start in the last quarter of 2012 and take three years.

Lumir Abdixhiku, of the think tank, the Institute Riinvest, said the new highway could not be built only with budget money, as there was no provision for this extra expense in the budget forecasts.

According to him, Kosovo would not be able to find the 600 million euro needed for this highway, especially while it was still struggling to find the 1 billion needed to finish the Vermice-Merdare highway.

“There is definitely no chance that this can be funded with budget money, as the country’s financial stability is under question even with the highway that has already started,” Abdixhiku said.

Abdixhiku added: “If they plan to build it with budget money, Kosovo risks entering a deeper budget crisis than Greece.”

But Lah Nitaj maintainted that the government had weighed all these issues and still believed the project could be completed without risking financial stability.