The report discusses the principaleconomic, and social reform policy tasks, Kosovo is facing,following the decade-long losses due to civic exclusion of amajor part of its ethnic population, the absence ofinvestments, and the neglect of physical, and human capital,a period which culminated in the 1999 conflict. It intendsto inform on the framework of the United Nations InterimAdministration in Kosovo, i.e., the consolidation of peace,by fostering social reconciliation, towards achievingsustainable economic growth in the province. The keychallenges to the political economy address: 1) theformulation of a sustainable budget, increasingly financedthrough local taxation, hence, with reduced reliance onexternal donor support. Fiscal institutions need to bedeveloped to ensure efficient public spending; 2) theestablishment of trade liberalization, and a customs regime,to increase the potential for growth, and exports, allowingas well to benefit from the arrangements fostered by theStability Pact, and the European Union; 3) the use of hardcurrency for internal transactions, and savings, and, thedevelopment of a strategy for banking sector development;and, 4) the creation of a reformed framework to encouragegrowth, by stimulating private enterprise development.Moreover, three aspects of social policy call for: aneducation policy at par with competitor countries; healthpolicy that strengthens health care delivery, and addressesthe effects of recent social traumas; and, social protectionregarding a highly vulnerable population.
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