Announcing a government’s budget is one of the most important economic events of the year. In advanced economies, such announcements spark extensive debates that transcend politics. A budget is more than a plan of revenues and expenditures—it serves as a declaration of intent, a political statement and a reflection of government performance.
Kosovo’s 2025 Budget was recently approved in Parliament. The first thing that stands out in the 2025 budget is its lack of ambition. In the past, governments, eager to lead national elections, announced ambitious capital projects, many of which faced criticism for their high costs. As in the previous five years, this budget includes no such initiatives.
The World Bank’s economic growth forecast for the coming years indicates that Kosovo remains stuck in the 3-4% range. At this rate, experts estimate that it could take Kosovo 40 years to reach the average European living standard.
Historically, Kosovo’s government has struggled with good planning. In the current year, execution rates have been low—only 45% of funds allocated for capital projects were spent in the first 10 months of 2024. However, the focus on how much is spent often overshadows a more critical question: Where is the money spent?
For example, while certain infrastructure projects are essential, the budget includes building numerous schools in rural areas where student numbers are in decline, showcasing a concerning lack of strategic planning.
While no major capital project is completed within a year, planning for it in the budget could inspire confidence in the private sector. However, instead of presenting bold plans, the government has opted for populist measures that lack vision and undermine the country’s long-term development potential.
Kosovo’s Sovereign Fund and Development Bank not reflected in the budget
The government’s long-term vision of economic growth relies on two key initiatives: the Sovereign Fund and the Development Bank—yet neither is included in the 2025 budget.
While sovereign funds typically arise in resource-rich countries with budget surpluses, Kosovo's Sovereign Fund would manage assets from privatization and state-owned enterprises, with a mandate to create new public enterprises—a somewhat counterintuitive goal given their historical performance. With the government’s four-year mandate nearing its end, the Sovereign Fund remains non-operational, delayed by recruitment, bureaucratic and legal issues.
Similarly, the Development Bank intended to support credit-constrained firms, stimulate growth and boost exports in targeted sectors. The absence of budget allocation for these initiatives underscores a misalignment between the government’s goals and its fiscal planning, raising questions about the necessity and feasibility of these institutions.
Populism in election-year budgets
The 2025 budget reflects a familiar trend of election-year populism. In 2010, the government implemented a massive 50% wage hike in the public sector, widely criticized as unsustainable and a purely populist move. While constrained by post-2010 fiscal rules, the 2025 budget mirrors this tendency.
The budget plans an increase for salaries and social benefits, which account for approximately 250 million euros—roughly 2.5% of GDP. While these measures may provide immediate relief and boost electoral support, they raise serious concerns about long-term sustainability. Although inflation has moderated in the last year, the surge in spending risks reigniting future price hikes.
The Delayed Reforms of Social Schemes
The government has committed to reforming social programs by getting a loan from the World Bank. The goal of these reforms is to standardize social benefit schemes and establish a clear framework for their growth.
Linking social programs to inflation and economic growth could help eliminate politically driven decisions during election years. In other words, instead of implementing sudden changes to social schemes arbitrarily, their value would gradually increase, minimizing the potential impact on prices.
Similar to other major promised reforms, the revision of social benefits is still unfinished, further extending the list of long-delayed initiatives.
A budget lacking transparency, accountability and equity
A glaring issue with Kosovo’s budget process is its lack of transparency. In most countries, a detailed budget information report is published alongside the budget to inform citizens about its contents. In Kosovo, this document often appears months later and provides only superficial details.
Additionally, Kosovo does not implement program budgeting, an approach that links government expenditures to specific programs and measurable outcomes. This method allows for better tracking of how public funds are used and ensures accountability by linking spending to tangible results.
Similarly, Kosovo does not employ gender budgeting, a vital tool for evaluating and addressing the distinct impacts of fiscal policies on men and women. Gender budgeting ensures that resource allocation considers gender disparities and promotes equity by integrating gender perspectives into all stages of the budgeting process.
The absence of both approaches makes it challenging for the public to assess the efficiency of budgetary allocations or to guarantee that resources are distributed fairly and effectively.
Debt dynamics show a shift toward foreign borrowing
For the first time, Kosovo’s public debt will rely more on foreign creditors, instead of domestic borrowing. Economist Paul Krugman argues that domestic debt is more sustainable because it is essentially “money we owe to ourselves,” with interest payments staying within the country.
While Kosovo’s debt level remains manageable and foreign loans are not very costly, the shift to foreign borrowing highlights the government’s inability to raise funds domestically.
Furthermore, the government has not reissued the much-promoted “Diaspora Bonds,” reflecting the limited interest of the Kosovar diaspora in lending to the state.
The missing debate
One of the most disappointing aspects of the 2025 budget—much like previous ones—is the lack of meaningful debate. Civil society, which should play a pivotal role in holding government policies to account, has been largely muted. While a few reports on the budget exist, they largely lack critical analysis, focusing more on the descriptive aspects of the revenues and expenditures.
Populist measures, such as wage and social benefits increases, once criticized as “vote-buying policies,” are now accepted as “fiscal policies.” This lack of engagement weakens democratic accountability and deprives the government of constructive feedback.
In conclusion, Kosovo’s 2025 budget offers no ambition for the country’s medium-term economic future. While it maintains fiscal discipline, it remains rooted in the populist tendencies typical of election years. Kosovo’s leaders, civil society, and citizens must demand better—not just more spending, but smarter spending; not just infrastructure, but higher-quality projects; not just numbers, but a vision for a prosperous and sustainable future.
