Before the COVID-19 crisis, the Republic of Kosovo had experienced positive economic growth. Yet, it stands out among European countries for its high rates of poverty and poor labor market outcomes. And despite a sizeable budget, Kosovo’s social protection system has been largely ineffective in addressing these issues. In the coming years Kosovo stands to benefit from a growing young population, but to reap the benefits it needs to invest in human capital while promoting employment and protecting those vulnerable to shocks. A strong social protection system can play an important role in promoting these policy objectives.
To support Kosovo in further developing its social protection system, the World Bank, with financing from the European Union, conducted a Situational Analysis of the Social Protection System in Kosovo. The analysis assesses the extent to which Kosovo’s social protection system fulfils its purpose and proposes areas for reform in the short-, medium-, and long-term. Recent initiatives have demonstrated the government’s legislative commitment to using social protection to better the lives of the Kosovar population. The analysis outlines some of the main challenges to-date and offers potential avenues for further reforms.
Main Findings
Targeting and eligibility criteria: Social assistance spending is skewed towards cash transfers that are unrelated to poverty, leaving the social protection system unbalanced. There is scope for improvement in reaching the poor, starting with the removal of the Social Assistance Scheme’s (SAS) stringent categorical eligibility criteria that disincentivize work among beneficiaries and exclude families with children over the age of five years as well as the working poor. Removing these criteria would then allow the SAS to expand its coverage to additional extremely poor households. In parallel, coverage of disability benefits is low and, given that eligibility rules differ across benefits, there are gaps and inequities across benefits. Finally, while the Government has invested in the management information system of the SAS, delivery systems can be further strengthened to better reach the poorest and promote their access to benefits.
Social Services: Currently, expenditures on social services are disproportionately low. In addition, the delivery of social services could benefit from the establishment of a referral system or case management to better ensure the coordination with social benefits and other basic services (particularly health and education), supported by the better training of social workers to allow them to provide counselling and other needed services. This would shift social services from reacting to vulnerabilities to preventing them, while also improving the contribution of the social protection system to building human capital by helping ensure that children in poor households receive health and education services.
Pension reform: Kosovo has universal pension coverage. However, the pension system is highly fragmented, leading to large inequities across the non-contributory pensions (basic, ex-contributory, special, war veteran and other war-related pensions). Only about a third of the working-age population contributes to the second pillar, and contributory pensions only provide temporary support until the account is depleted. Disability and survivor pensions are, for the most part, inadequate. And the proliferation of categorical pension benefits over the years raises concerns regarding the system’s sustainability.
Labor Market Incentives: Kosovo spends little on employment and labor market policies. The Employment Agency of the Republic of Kosovo—the main implementor of labor market policies and public employment services—has limited capacity, and the services provided do not meet the needs of the population. To support employment and employability, resources going into Active Labor Market Programs (ALMPs) need to be increased, both for the Public Employment Agency but also to allow for partnerships with non-public providers. Maternity benefits are particularly generous and may discourage the employment of women, whereas unemployment benefits do not exist.