The countries of Southeastern Europe(SEE) and the province of Kosovo (thereafter, Kosovo) haveundergone a significant, though difficult, transition overthe past decade. Series of conflicts in the region havecomplicated the transition process, which in the initialphase focused on macroeconomic stabilization andreconstruction. Helped by macroeconomic stability andefforts in advancing structural reforms, real Gross DomesticProduct, or GDP growth in region has picked up this century,averaging 5.8 percent during 2000-2006, although it hasstill lagged the pace in both the more advanced reformersand the average for emerging Asia. In addition to boostingliving standards, the SEE countries' shared aspirationto advance European Union (EU) integration has beenincreasingly shaping the reform agenda. This report reviewsthe level, composition and outcomes of government spendingand distills some of the lessons that emerge from efforts bythe SEE countries in reforming expenditure policies. Thereport identifies key remaining challenges and proposes abroad menu of options in further reforms of sectors thataccount for the largest shares of public spending across thecountries, and where reforms are likely to have significantbudgetary implications. This has motivated the choice ofsectors discussed in the report: social protection(including pensions), health, education, publicadministration and infrastructure.
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