Towards Improved Structural Reforms and Fiscal Frameworks

High Level Meeting: February 26 – 27, 2019ILjubljana, SloveniaIData and Analysis for Designing Policies, Budget Preparation and Execution

This carefully constructed event will bring versatile interest groups together and discuss the structural reforms in South East Europe and their improved integration into the fiscal frameworks of the countries. The discussion will be facilitated through the prism of increased competitiveness and growth of the region and enhanced EU enlargement. Target audience: ministers of finance, line ministers, Economic Reform Programme coordinators and other officials from Western Balkans and Turkey. Each country from the region will be represented with up to five representatives.

Background

On their path to European Union (EU) accession, the economies of the Western Balkans and Turkey need to become sufficiently vital to withstand the competitive pressures of the EU Single Market. Economic governance, competitiveness, and trade are identified as the key areas to be strengthened.

The 2018 Strategy on Enhanced EU Engagement with the Western Balkans reaffirms the European Perspective of these economies[1] and clearly sets the structural reforms in the first plan of priorities by passing the message that “structural reforms outlined in ERPs must be pursued with more rigour”.

Key policy instruments in this process are the Economic Reform Programmes (ERP), inclusive of structural reforms, designed to boost growth and competitiveness while ensuring fiscal discipline and sustainability. Their preparation requires strong commitment and clear guidance at the government level about the prioritization and implementation of policy measures, as well as their costing and financing over the medium-term.

Over the recent years, ERPs have been significantly strengthened on the subject of structural reforms while their costing has not seen the same improvement. The identified challenges by the EC and beneficiaries themselves include: lack of clarity in definitions of the structural reform measures and their prioritisation; the timing and impact of structural reforms are often not precise and brought in the context of either the national development strategies or EU accession process; budgeting needs further clarification and it is often unclear to what extent all activities required by the measure have been costed; budgetary impact is partially assessed; risk assessments need to be prepared focusing on sectors and branches most vulnerable to informalities, and corrective measures need to be identified and applied.

The above challenges imply inconsistencies in integrating the structural reforms into the fiscal programming and overall fiscal frameworks of the countries. This results in mutually reinforcing inadequate policy design and inadequate budgeting at the level of line ministries and also government level, and contributes to ineffective public financial management. These inconsistencies have been addressed through several actions mainly supported by the EU.

The Center of Excellence in Finance (CEF) has been systematically extending its focus to promote capacity development of line ministry finance officials since 2008. The need for such extension was put forward especially by ministries of finance in the CEF constituency that seek to strengthen the budget formulation process, medium-term budget and macroeconomic frameworks, and quality of reports submitted to the European Commission. In response, the CEF has designed and delivered several projects, with input from the European Commission and involvement of international financial institutions. It established an extended community of local trainers who advocate peer-to-peer learning.

The Organisation for Economic Cooperation and Development (OECD), with the support of the EU, has for several years supported the region in the area of structural reforms and has strengthened the capacity of government authorities to identify constraints to growth and competitiveness, improve inter-ministerial coordination, improve the skills in developing effective policy solutions and in prioritising reform measures and to strengthen the policy dialogue with civil-society stakeholders[2].

Complementary to that work, the ERP Guidance Note for 2018-2019 has been updated with support of CEF experts. It has introduced a completely revised and methodologically broadened framework on this subject, which now represents an important conceptual backbone for the new project to be implemented by the CEF and funded by the European Union.

The International Monetary Fund, Fiscal Affairs Department (IMF FAD) has also provided support to economic governance and strengthened public financial management in the six pre-accession countries. Their activity is also funded by the EU.

The Overseas Development Institute (ODI) is an independent, global think tank that has researched the institutional settings and roles of the ministries of finance and line ministries and the relations they establish and nurture in the fiscal programming process.

The CEF is initiating a new EU funded project “Strengthening Line Ministries’ Capacities to Assess Fiscal Implications of Structural Reforms’’. Its overall objective is to ensure sound and consistent assessment of the fiscal implications of structural reforms in the countries of Western Balkans and Turkey. It will undertake capacity development activities to: a) strengthen analytical capacities of line ministries aimed at improving their ability for comprehensive assessment of fiscal implications of SRs; b) strengthen coordination of line ministries on fiscal implications of SRs, (i) internally among policy departments, the finance directorate and the cabinet; and (ii) externally with the ministry of finance and c) promote exchange of good practices among line ministries across the region on their activities related to the assessment of fiscal implications of structural reforms.

 

Objectives

This carefully constructed event will bring versatile interest groups together and discuss the structural reforms in South East Europe and their improved integration into the fiscal frameworks of the countries. The discussion will be facilitated through the prism of increased competitiveness and growth of the region and enhanced EU enlargement.

It is designed to:

  • Discuss the wider picture of the economic governance and how it fits the EU accession agenda;
  • Show the key role the structural reforms have in building competitive market economies;
  • List the key issues and potential improvement points for integrating the structural reforms into the fiscal frameworks of the countries;
  • Understand the regional challenges in sectoral policy making and planning its fiscal implications, and
  • Initiate the implementation of the three-year project “Strengthening Line Ministries’ Capacities to Assess Fiscal Implications of Structural Reforms’’ to be implemented by the CEF and financed by the EU.

 

Geographical Focus

The discussion over improved integration the structural reforms into the fiscal frameworks at this event will be focused on the EU candidate and potential candidate countries from South East Europe: Albania, Bosnia and Herzegovina, Kosovo[3], the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey.

 

Participants and languages

This event is attended by invitation only.

Participants will include ministers of finance, line ministers, Economic Reform Programme coordinators from Western Balkans and Turkey. Each country from the region will be represented with up to five representatives.

The event will be attended by high representatives of the European Commission, international organizations, civil society organizations and other partners who are supporting the strengthened economic governance in the region.

The event will be delivered in English. Interpretation will be provided in exceptional cases, upon request.

 

Place and Time

This regional policy dialogue will take place in Ljubljana, on February 26-27, 2019. The opening ceremony will take place at the CEF premises, in the evening of February 26. The conference will be happening in hotel Slon, where most participants will be accommodated.

 

[1] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions (2018), A credible enlargement perspective for an enhanced EU engagement with the Western Balkans, COM(2018) 65 final:

https://ec.europa.eu/commission/publications/eu-western-balkans-strategy-credible-enlargement-perspective_en

[3] This designation is without prejudice to positions on status, and is in line with UNSC 1244 and the ICJ Opinion on the Kosovo Declaration of Independence

Partners

This learning initiative is supported by:

European Union