The Sustainable Employment Development Policy Operation

The Minister of Finance of the Republic of Kosovo, Bedri Hamza, and the World Bank’s Country Manager for Kosovo, Jan-Peter Olters, have signed on May 11, 2012, the Letters of Agreements for the Second Sustainable Employment Development Policy Operation (SEDPO-2), a multi-donor-financed budget support grant for Kosovo in the total amount of approximately €36.5 million.

The funding comprises €23 million in grant funds from the World Bank, approved by its Executive Directors on May 3, 2012, and additional grants of about €13.5 million provided by bilateral and multilateral donors (European Union, Czech Republic, Denmark, Estonia, Finland, Italy, Norway, Sweden, Switzerland, and the United States).

This operation is the largest joint financing activity in Kosovo, which has helped to limit transaction costs for the Government and the 10 donors.

“With the Sustainable Employment Development Policy Program (SEDPP), the donors have provided the Government of Kosovo with an important impetus to redress macro-fiscal imbalances and overcome some of the key constraints to creating sustainable employment,” said World Bank’s Manager for Kosovo, Jan-Peter Olters, at the signing ceremony.

“This is helping to unleash Kosovo’s socio-economic development potential and reduce poverty,” he added, “which is tremendously important in a country with one of the highest unemployment rates and lowest per capita income levels in Europe.”

The SEDPP has supported a comprehensive set of policy reforms that have been identified by all participating donors as critical to support the objectives of promoting macroeconomic stability and creating sustainable employment. The support was divided in two operations, of which the first one disbursed €23.8 million in December 2011.

Specifically, the reforms undertaken in the context of SEDPO-2 have (i) improved the investment climate and addressed key bottlenecks to firm entry and growth by easing business registration and improving access to finance; (ii) strengthened procurement and public financial management to increase transparency and improve budget execution; (iii) developed civil service pay/grading structure to improve payroll management; (iv) bolstered labor-market institutions to provide targeted services to unemployed persons and social assistance recipients; and (v) increased the quality and relevance of vocational education institutions to raise productivity and reduce employer uncertainty.

The policy reform agenda enjoyed strong Government ownership across Ministries and Central Bank of the Republic of Kosovo. The Inter-Ministerial Committee for Sustainable Employment coordinated the joint efforts by the Ministries of Trade and Industry, Finance; Labor and Social Welfare; Education, Science and Technology, and Public Administration, with the Deputy Prime Minister’s leadership in coordinating the Inter-Ministerial committee having proven essential to the program’s success.

SEDPO-2 represents an important element of the proposed World Bank Group’s Country Partnership Strategy (CPS) for Kosovo during 2012–15, which focuses as one of two main pillars on inclusive growth and employment generation. Funds will be made available as the Government has implemented the agreed policy reforms focusing on improved transparency, budgetary and fiscal management, and sustainable employment.

The Letters of Agreements for the First Sustainable Employment Development Policy Operation were signed by the World Bank Country Director for Southeastern Europe, Jane Armitage, and the Minister of Finance of Kosovo, Bedri Hamza, in Pristina, on March 11, 2011. The agreements were ratified by the Parliament of Kosovo on May 6, 2011.