May 25 (SeeNews) - Kosovo needs to strengthen its institutional capacities for public procurement and management of investment projects in order to meet its ambitious capital spending target this year, the European Council said.
"The 2017 budget contains realistic revenue projections, but capital spending targets seem overly ambitious, in particular as administrative capacities to prepare and execute investment projects remain limited," the Council said on Tuesday in a statement after a meeting between representatives of the Western Balkans and Turkey and the European Commission and the European Central Bank.
The Council added that even though the veteran pensions scheme is related to higher than expected costs, it does not give reasons for concern. "However, the rise in current expenditure needs to be contained, notably through reinforcing the functioning of fiscal rules," it said.
The Council also called upon Kosovo to ensure appropriate staffing and to enhance the institutional capacities at the finance ministry.
The country's economy is expected to continue to expand on the back of strong household consumption and an expected pick-up in public investment, as the Council warned that these projections depend on the current political situation.
Structural obstacles, such as an unreliable energy supply, widespread informalities and weak rule of law remain main hindrances to Kosovo's economic growth and competitiveness, the Council added. A further concern is the very law labour market participation in the context of increasing labour force. "It is of utmost importance to develop a comprehensive approach fostering labour market integration of young people and increase targeted labour market measures," the Council stressed.
Kosovo will hold early general elections on June 11 after earlier this month the coalition government led by Isa Mustafa lost a no-confidence vote filed by the opposition and backed by one of the coalition parties, the Democratic Party of Kosovo, PDK.