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As Kosovo moves towards resolution of
its political status, the attention of the authorities and
of the international donor community is increasingly turning
towards the need for modernization of Kosovo's economic
and social infrastructure in order to facilitate sustained
economic growth and development. This note looks further
into the underlying causes and the actions that will be
required to address them. The main conclusions of the note
are that the fundamental causes of under spending on the
capital spending program lie in the failure to plan and
manage the program within a medium-term context and in the
institutional capacity constraints that currently confront
the public finance management (PFM) system. The note begins
by providing a brief overview of the scale and composition
of Kosovo's capital spending program (section B) and
the institutional arrangements for public investment
management (section C). It then goes on to look at the
causes of the fall in the execution of the capital spending
budget that occurred in 2006 (section D), and to consider in
more detail issues relating to capital investment
identification and development (section E), budget
preparation and financing (section F), and capital budget
execution, procurement and monitoring (section G). The final
section summarizes the key conclusions and next steps
actions (section H). A summary of the analysis is provided
in the assessment framework that is included in annex I.
